The entire energy sector is reeling from a more than 40% drop in oil prices over the last 6 months, with over half of that decrease coming over the last 30 days. No one knows how long the slump in crude oil prices will last, but virtually no one believes oil prices are going to get back above $100 anytime in the next few quarters.
A December 12th report from FactSet Insight points out that industry analysts are pessimistic on earnings for the energy sector in 2015 based on negative revisions to earnings estimates.
Energy sector fourth quarter earnings estimates
The FactSet report highlights that the aggregate earnings estimate for the S&P 500 energy sector for the fourth quarter has decreased by 22% since September 30 ($30.9 billion to $24.5 billion). Over this same period, the price of the energy sector as a whole has dropped by around 16% ($661.05 to $555.82). Of note, this 16% drop off is the greatest decline in price among all sectors during this period.
2015 energy sector earnings estimates
According to the report, the aggregate earnings estimate for the energy sector for 2015 is also down by 22% since September 30 ($133.1 billion to $103.7 billion). That means the energy sector is on course to report a year-over-year decline in earnings in the neighborhood of 12%, compared to anticipated earnings growth of more than 8% on September 30.
Breaking things down at the company level, you can see that 24 of the 43 companies (close to 56%) in the energy sector have had EPS estimates for 2015 slashed by at least 20% to date. The firms with the largest downward EPS revisions percentage-wise include Murphy Oil (from $5.07 to $1.88), Marathon Oil Corporation (NYSE:MRO) (from $2.83 to $1.09 ), Apache Corporation (NYSE:APA) (from $6.86 to $3.23), and Hess Corporation (NYSE:HES) (from $5.20 to $2.48). Of note, the downward revision of estimates for Exxon Mobil (NYSE:XOM) (from $7.65 to $6.28) and Chevron (from $10.99 to $8.42) were the greatest contributors to the overall decrease in the earnings growth rate for the sector.