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Energy ETFs in focus on big oil earnings and BHI-GE deal

Though earnings in the energy sector have improved in the third quarter with an earnings beat ratio of 72.7% as per the Earnings Outlook, it continues to be the biggest drag on the overall S&P 500 earnings growth picture. Total earnings from 82.4% of the sector’s total market capitalization reported so far are down 63.1% on a 13.7% revenue decline. Revenue beat of 36.7% remains unimpressive.

In particular, the biggest U.S. energy producers – Exxon Mobil XOM, Chevron CVX and ConocoPhillips COP – posted a substantial drop in year-over-year earnings. While XOM surpassed our earnings estimates, CVX and COP missed on the bottom.

Earnings in Focus

The largest U.S. oil company, Exxon Mobil, reported earnings per share of 63 cents, trumping the Zacks Consensus Estimate by 3 cents but declining from the year-ago earnings of $1.01. Total revenue plunged 13% year over year to $58.68 billion and was below our $60.56 billion estimate. Shares of XOM dropped 2.5% soon after the earnings release on October 28.

Chevron, which trails Exxon Mobil, topped our expectation on both the top and bottom lines buoyed by the success of its cost savings initiatives amid a protracted oil price rout. Earnings per share came in at 68 cents, much above the Zacks Consensus Estimate of 39 cents but lower than the year-ago earnings of $1.09. Revenues dropped 12% year over year to $30.14 billion but were above the Zacks Consensus Estimate of $30.06 billion. The stock climbed as much as 5.1% following the earnings announcement on October 28.

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