The Energy sector will be a focus for the market this week, as Exxon Mobil and Chevron are scheduled to report earnings on November 1. The Energy sector is reporting largest (year-over-year) earnings decline of all eleven sectors in the S&P 500 for Q3 2024 at -27.3%. Lower year-over-year oil prices are contributing to the year-over-year decrease in earnings for the sector, as the average price of oil in Q3 2024 ($75.27) was 8% below the average price for oil in Q3 2023 ($82.22).
It is interesting to note that analysts have continued to lower EPS estimates for companies in the Energy sector since the end of the third quarter (September 30), led by Chevron (to $2.43 from $2.76), Exxon Mobil (to $1.89 from $2.00), and Marathon Petroleum (to $0.98 from $2.25). As a result, the earnings decline for this sector has increased to -27.3% today from -19.1% on September 30.
At the sub-industry level, 3 of the 5 sub-industries in the sector are reporting (or are predicted to report) a year-over-year decline in earnings: Oil & Gas Refining & Marketing (-83%), Oil & Gas Exploration & Production (-19%), and Integrated Oil & Gas (-15%). On the other hand, two sub-industries are reporting year-over-year growth in earnings: Oil & Gas Equipment & Services (13%) and Oil & Gas Storage & Transportation (12%). The Oil & Gas Refining & Marketing sub-industry is also the largest contributor to the earnings decline for this sector. If this sub-industry were excluded, the blended (year-over-year) earnings decline for the Energy sector would improve to -11.9% from -27.3%.
Looking ahead, analysts are predicting earnings growth for the sector starting in Q2 2025. For Q4 2024 and Q1 2025, analysts are calling for earnings declines of -19.9% and -3.0%, respectively. For Q2 2025 through Q4 2025, analysts are expecting earnings growth rates of 0.4%, 23.5%, and 18.9%, respectively.
FactSet Senior Energy Analyst Connor McLean provided commentary on key trends to watch for the Energy sector during this earnings season. View more commentary from Connor.
“Geopolitical tensions and the impending U.S. elections are adding volatility to the global oil market as 2025 approaches. Despite weak demand globally in 2024, OPEC+ is potentially prepared to roll back nearly 2.2 MMb/d of voluntary production cuts beginning in December resulting in downside risk for crude pricing in 2025. However, pricing is expected to remain constructive for year-on-year crude oil production growth in the US. As storage injection season comes to a close, the US natural gas market has become progressively more bearish over the past few weeks despite producers’ efforts to work off the storage inventory surplus by curtailing production volumes. With building concerns of a warm winter, LNG demand timing slipping, and pent-up supply waiting to hit the market when prices increase this winter, storage inventories could remain elevated in 2025 and weigh on Henry Hub pricing.”
The Utilities sector will also be a focus for the market during the next few weeks, as 94% of the companies in this sector are scheduled to report earnings over the next two weeks (October 28 through November 8). The Utilities sector is reporting the sixth-largest (year-over-year) earnings growth rate of all eleven sectors in the S&P 500 for Q3 at 3.4%.
At the industry level, 4 of the 5 industries in the sector are reporting (or are predicted to report) year-over-year growth in earnings: Water Utilities (11%), Gas Utilities (7%), Multi-Utilities (6%), and Electric Utilities (4%). The Independent Power & Renewable Electric Producers (-18%) industry is the only industry in the sector projected to report a year-over-year decline in earnings.
Looking ahead, analysts are predicting earnings growth for the sector over the next five quarters. For Q4 2024 through Q4 2025, analysts are calling for earnings growth rates of 12.6%, 6.2%, 4.3%, 11.1%, and 7.5%, respectively.
FactSet Senior Content Manager Nate Miller discussed key trends to watch related to the Utilities sector during this earnings season.
"As US grid operators revise load forecasts for AI-driven data centers and increased electric vehicle adoption, large customers are seeking atypical projects and power purchase agreements (PPAs) to secure sufficient power. This shift has sparked renewed interest in nuclear energy. Constellation Energy plans to restore one unit at the Three Mile Island nuclear facility in Pennsylvania for at least $1.6 billion to supply Microsoft with a 20-year PPA. Other tech giants are also investing in nuclear. Google will purchase power from Kairos Power's Small Modular Reactors (SMRs), while Amazon has invested in Talen Energy's Susquehanna nuclear facility in Pennsylvania and four SMRs in Washington state via Energy Northwest.
"Despite enthusiasm for recommissioning nuclear units and developing SMRs, regulatory and technical challenges remain. For example, Holtec's Palisades nuclear facility in Michigan received a conditional $1.52 billion loan guarantee from the Department of Energy, but corrosion issues were found in its steam generators. Nevertheless, Holtec remains optimistic about resuming operations by late 2025. The growing demand for electricity driven by digitalization and transportation electrification underscores the continued necessity for new renewable projects and gas generation through at least the end of the decade."
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