Top 6 High-Flying Energy Stocks Set to Beat on Q2 Earnings

·8 min read

The second-quarter earnings season has been impressive thus far. The last quarter was a strong one both in terms of economic data and stock market performance.

As of Jul 22, before the opening bell, 103 companies of the S&P 500 Index reported results. Total earnings of these companies were up 117.6% year over year on 18.9% higher revenues. Moreover, 90.3% of these companies beat their earnings per share (EPS) estimates and 85.4% surpassed revenue estimates.

For the second quarter as a whole, total earnings of the S&P 500 Index are expected to be up 72.7% year over year on 19.8% higher revenues. This indicates an improvement over the initial projection of EPS increasing 62.2% from the same period last year on 18.2% higher revenues.

Meanwhile, six oil and natural gas explorers are poised to beat on earnings results this month. These stocks also popped in the last quarter. The combination of a favorable Zacks Rank and an expected earnings beat is likely to boost stock prices going forward too.

Energy Sector in Q2 At a Glance

The energy sector was one of the hardest-hit sectors in pandemic-ridden 2020. The sector stabilized in the first quarter of 2021 after the availability of COVID-19 vaccines and as the economy starts reopening slowly.

However, the second quarter was an impressive one for the energy sector courtesy of the global deployment of COVID-19 vaccines and faster-than-expected reopening of the U.S. as well as global economies.

In the last quarter, commodity prices, especially crude oil and natural gas prices soared. According to the U.S. Energy Information Administration, the average monthly WTI crude prices for the month of April, May and June of this year jumped to $61.72, $65.17 and $71.38 per barrel, respectively, from $16.55, $28.56 and $38.31 per barrel last year.

Likewise, U.S. Henry Hub average natural gas prices surged to $2.66, $2.91 and $3.26 per MMBtu, in April, May and June of 2021, respectively, from $1.74, $1.75 and $1.63 per MMBtu in the same period of 2020.

The Energy Select Sector SPDR (XLE), one of the 11 broad-sectors of the S&P 500 Index was one the major gainers in the second quarter, rallying more than 10.9%.

Our Top Picks

The six high-flying energy stocks discussed here are slated to release second-quarter earnings results this month. Each of these stocks carries either a Zacks Rank# 1 (Strong Buy) or 2 (Buy) and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank stocks here.

Our research shows that for stocks with the combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better, the chance of an earnings beat is as high as 70%. These stocks are anticipated to appreciate after earnings releases. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The chart below shows the price performance of our six picks in the last quarter.

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Range Resources Corp. RRC operates as an independent natural gas, natural gas liquids and oil company in the United States. It is engaged in the exploration, development and acquisition of natural gas and oil properties.

Range Resources has extensive oil and gas resources in key regions like Marcellus Shale & North Louisiana. The company is well-positioned to benefit in the long run from its projects in the Appalachian Basin. Its core operating regions in the basin comprise a huge inventory of low-risk drilling inventories that are likely to fetch incremental natural gas production volumes.

The Zacks Rank #1 company has an Earnings ESP of +3.51%. It has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved 1.6% over the last 7 days. The company is set to release earnings results on Jul 26, after the closing bell.

Ovintiv Inc. OVV is engaged in the exploration, development, production and marketing of natural gas, oil, and natural gas liquids. It operates through USA Operations, Canadian Operations, and Market Optimization segments.

Ovintiv has an attractive oil and gas production portfolio in three major North American unconventional basins: Montney, Anadarko and the Permian. The company has reduced expenses in a disciplined manner, which should boost free cash flow generation in near future.

The Zacks Rank #1 company has an Earnings ESP of +14.49%. It has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved 6.3% over the last 7 days. It recorded earnings surprises in three out of the last four reported quarters, with an average beat of 21.9%. The company is set to release earnings results on Jul 27, after the closing bell.

Matador Resources Co. MTDR is engaged in the exploration, development, production and acquisition of oil and natural gas resources in the United States. It operates in two segments, Exploration and Production, and Midstream.

Improving oil prices are definitely a boon for Matador’s upstream operations. This is because the company has a strong presence in the oil-rich core acres of the Wolfcamp and Bone Spring plays in the Delaware Basin. In the Delaware Basin, this leading upstream energy player is planning to operate four drilling rigs throughout the remainder of 2021.

The Zacks Rank #1 company has an Earnings ESP of +2.63%. It has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved 8.4% over the last 7 days. It recorded earnings surprises in the last four reported quarters, with an average beat of 133.3%. The company is set to release earnings results on Jul 27, after the closing bell.

Hess Corp. HES explores, develops, produces, purchases, transports, and sells crude oil, natural gas liquids (NGLs), and natural gas. It operates through two segments, Exploration and Production, and Marketing and Refining.

Hess has made multiple world-class oil discoveries at the Stabroek Block, off the coast of Guyana. With the latest oil discovery at the Longtail-3 well, it has added to its previously estimated 9 billion barrels of oil equivalent of recoverable resource. Production is estimated to gradually reach 1 million bpd by 2027.

The Zacks Rank #2 company has an Earnings ESP of +18.52%. It has an expected earnings growth rate of more than 100% for the current year. It recorded earnings surprises in the last four reported quarters, with an average beat of 27.7%. The company is set to release earnings results on Jul 28, before the opening bell.

Antero Resources Corp. AR is an independent oil and natural gas company that acquires, explores for, develops, and produces natural gas, natural gas liquids, and oil properties in the Appalachian Basin of the United States.

Antero Resources is one of the fastest-growing natural gas producers in the United States. Its strategic acreage position in the low-risk and long reserve-life properties of the Appalachian Basin is a major positive. Its core acreage position allows for significant long lateral drilling opportunities and capital efficiencies

The Zacks Rank #2 company has an Earnings ESP of +44.02%. It has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved 9.1% over the last 30 days. The company is set to release earnings results on Jul 28, after the closing bell.

SM Energy Co. SM is an independent energy company engaged in the acquisition, exploration, development, and production of oil, natural gas, and natural gas liquids in the state of Texas.

SM Energy’s attractive oil and gas investments, balanced and diverse portfolio of proved reserves, as well as drilling opportunities are likely to create long-term value for its shareholders. Given the company’s increasing focus on oil, specifically in the Permian Basin and Eagle Ford areas, we believe that it will be able to boost oil-weighted activity going forward.

The Zacks Rank #2 company has an Earnings ESP of +23.44%. The Zacks Consensus Estimate for the current year has improved 12.2% over the last 30 days. It recorded earnings surprises in three out of the last four reported quarters, with an average beat of 38.3%. The company is set to release earnings results on Jul 29, after the closing bell.


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Hess Corporation (HES) : Free Stock Analysis Report

Range Resources Corporation (RRC) : Free Stock Analysis Report

SM Energy Company (SM) : Free Stock Analysis Report

Matador Resources Company (MTDR) : Free Stock Analysis Report

Antero Resources Corporation (AR) : Free Stock Analysis Report

Ovintiv Inc. (OVV) : Free Stock Analysis Report

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