{"id":6151,"date":"2016-08-02T23:57:18","date_gmt":"2016-08-02T23:57:18","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=6151"},"modified":"2016-08-02T23:57:18","modified_gmt":"2016-08-02T23:57:18","slug":"remaining-a-nervous-energy-bull","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=6151","title":{"rendered":"Remaining a Nervous Energy Bull"},"content":{"rendered":"<p>Exxon-Mobil (XOM) and Chevron (CVX) reported their 2nd quarter &#8217;16 financial results last Friday, and the results &#8211; particularly Exxon&#8217;s &#8211; took some of the shine off the forward estimates of the Energy sector, that were in fact looking quite good, as we headed into the 2nd half of 2016.<\/p>\n<p>Q4 &#8217;16&#8217;s Energy sector earnings growth had been looking pretty good week-after-week as I updated this blog each Saturday.<\/p>\n<p>Look at this attached spreadsheet:\u00a0<a href=\"https:\/\/fundamentalis.com\/?attachment_id=6152\" rel=\"attachment wp-att-6152\">FC &#8211; EnergyEst8216PostExxon<\/a><\/p>\n<p>The first block highlighted is the trend in 4th quarter, 2016 estimates: note the sharp drop in Q4 &#8217;16&#8217;s growth between July 29th and Monday August 1 &#8217;16.<\/p>\n<p>As soon as Exxon&#8217;s numbers hit the wires Friday morning, July 29th, my first thought in terms of the sector earnings revisions was &#8216;This won&#8217;t be good&#8221; and that was an accurate, off-the-cuff assessment. After writing about<a href=\"https:\/\/fundamentalis.com\/?p=6091\"> Energy and Basic Materials on July 23rd<\/a>, knowing Exxon and Chevron were poised to report their Q2&#8217;s I was convinced the Energy sector would continue to outperform into the back half of 2016.<\/p>\n<p>While there is a little more anxiety over the sector given the trend in crude oil and Exxon&#8217;s and Chevron&#8217;s numbers, note the bottom half of the above-linked spreadsheet.<\/p>\n<p>Exxon&#8217;s numbers and expected growth in 2017 didn&#8217;t budge at all with last Friday&#8217;s huge miss.<\/p>\n<p>The other aspect to the Exxon forward estimates is that forward revenue growth is improving far faster than EPS.<\/p>\n<p>Exxon&#8217;s 2016 revenue growth &#8211; despite last Friday&#8217;s horrid miss &#8211; is still showing steady improvement.<\/p>\n<p>Here is the recent Energy sector revenue growth history:<\/p>\n<ul>\n<li><em><strong>q2 &#8217;16<\/strong><\/em>: -24.7% (as of 8\/1\/16)<\/li>\n<li><em><strong>Q1 &#8217;16:<\/strong><\/em> -29.6%<\/li>\n<li><em><strong>q4 &#8217;15:<\/strong><\/em> -35.4%<\/li>\n<li><em><strong>q3 &#8217;15:<\/strong><\/em> -35.9%<\/li>\n<li><em><strong>q2 &#8217;15:<\/strong> <\/em>-31.7%<\/li>\n<li><em><strong>q1 &#8217;15:<\/strong><\/em> -34.7%<\/li>\n<li><em><strong>q4 &#8217;14:<\/strong><\/em> -13.5%<\/li>\n<li><em><strong>q3 &#8217;14:<\/strong><\/em> -2.6%<\/li>\n<li><em><strong>q2 &#8217;14:<\/strong><\/em> +3.3%<\/li>\n<\/ul>\n<p>The bottom sure looks to be in for the Energy sector in terms of the deteriorating revenue growth rate.<\/p>\n<p><em><strong>Conclusion:<\/strong><\/em> Remember, there is a difference between the commodity crude oil, and the Energy stocks. The PROJECTED revenue and EPS growth, even if it is just half of what is expected, is still a healthy rate of growth.<\/p>\n<p>What makes me nervous ? Gasoline consumption drives about half the demand for US crude oil distillation. Electric car&#8217;s, better mileage, aluminum trucks, etc. etc. all are poised to reduce the demand for gasoline over the next 5, 10, 20 years.<\/p>\n<p>Exxon, Chevron, Schlumberger, and Halliburton are the lion&#8217;s share of the Energy sector&#8217;s revenue and EPS. All the stock&#8217;s remain above their 200-day moving averages and the technical&#8217;s have improved nicely since the Q1 &#8217;16 bottom. (Long XLE, IYE, OIH for clients, with a small position in XOM directly.)<\/p>\n<p>The sentiment around the sector is pretty uniformly bearish, with the July drop in crude oil,<\/p>\n<p>My plan is to hold the above ETF&#8217;s into 2017 and evaluate the earnings results each quarter. However the positions can change at any time.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Exxon-Mobil (XOM) and Chevron (CVX) reported their 2nd quarter &#8217;16 financial results last Friday, and the results &#8211; particularly Exxon&#8217;s&hellip;<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[128,171,95,133,127],"tags":[],"class_list":["post-6151","post","type-post","status-publish","format-standard","hentry","category-cvx","category-energy-etfs-xle","category-energy-sector","category-oil-services-cos","category-xom"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6151","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6151"}],"version-history":[{"count":5,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6151\/revisions"}],"predecessor-version":[{"id":6157,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6151\/revisions\/6157"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6151"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6151"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6151"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}