Energy Sector: Largest Year-Over-Year Earnings Decline of all 11 Sectors
The Energy sector will be a focus for the market this week, as Exxon Mobil and Chevron are scheduled to report earnings on January 31. The Energy sector is reporting largest (year-over-year) earnings decline of all eleven sectors in the S&P 500 for Q4 2024 at -30.7%. Lower year-over-year oil prices are contributing to the year-over-year decrease in earnings for this sector, as the average price of oil in Q4 2024 ($70.32) was 10% below the average price for oil in Q4 2023 ($78.53).
It is interesting to note that analysts have continued to lower EPS estimates for companies in the Energy sector since the end of the fourth quarter (December 31), led by Exxon Mobil (to $1.57 from $1.77), Phillips 66 (to -$0.23 from $1.00), and Chevron (to $2.11 from $2.34). As a result, the blended earnings decline for the Energy sector has increased to -30.7% from -24.5% over this period.
At the sub-industry level, 3 of the 5 sub-industries in the sector are predicted to report a year-over-year decline in earnings: Oil & Gas Refining & Marketing (-102%), Integrated Oil & Gas (-33%), and Oil & Gas Exploration & Production (-12%). On the other hand, two sub-industries are reporting year-over-year growth in earnings: Oil & Gas Storage & Transportation (18%) and Oil & Gas Equipment & Services (less than 1%).
Looking ahead, analysts are predicting earnings growth for the sector starting in Q3 2025. For Q1 2025 and Q2 2025, analysts are calling for earnings declines of -8.4% and -5.3%, respectively. For Q3 2025 and Q4 2025, analysts are expecting earnings growth rates of 13.1% and 30.8%, 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.)
“As 2025 unfolds, an air of uncertainty hangs over the energy sector. OPEC+ continues to manage the market, delaying the rollback of voluntary production cuts, providing some support for benchmark oil pricing. However, geopolitical uncertainties and policy ambiguity surrounding the new Trump administration could add to the market’s volatility. Meanwhile, U.S. producers could see a boost from service cost reductions stemming from the sharp drop in activity in 2024, which may provide some breathing room but may not be enough to spark significant reinvestment as long as companies remain committed to a capital discipline framework. In natural gas, the timing and magnitude of a production response from U.S. producers remains uncertain after a sharp reversal in Henry Hub pricing. US LNG could be poised for a banner year in 2025, with new facilities taking feedgas volumes and a slate of projects advancing through the regulatory process with eyes on FID in the coming year.”
Utilities Sector: All 5 Industries Expected to Report Year-Over-Year Earnings Growth
The Utilities sector will also be a focus for the market during the month of February, as 90% of the companies in this sector are scheduled to report earnings during the month. The Utilities sector is reporting the sixth-largest (year-over-year) earnings growth rate of all eleven sectors in the S&P 500 for Q4 at 11.5%.
At the industry level, all 5 industries in the sector are reporting (or are projected to report) year-over-year earnings growth: Independent Power and Renewable Energy Producers (165%), Water Utilities (29%), Multi-Utilities (23%), Gas Utilities (9%), and Electric Utilities (1%).
At the company level, Vistra Corp. is expected to be the largest contributor to earnings growth for the sector. If this company were excluded, the blended earnings growth rate for the Utilities sector would fall to 5.5% from 11.5%
Looking ahead, analysts believe earnings growth for the sector will continue over the next four quarters. For Q1 2025 through Q4 2025, analysts are calling for earnings growth rates of 8.5%, 4.3%, 17.4% and 13.8%, respectively.
FactSet Associate Content Manager Eric Hinojosa discussed key trends to watch related to the Utilities sector during this earnings season.
"Data centers and load growth are emerging as central themes in power markets, marking a significant transition from periods of flat or declining demand to an era of seemingly limitless growth. As new forecasts are released, we've seen a dramatic upward revision in peak load projections, with an 81% increase anticipated in ERCOT from now to 2034. This highlights a growing need for generation sources capable of delivering continuous power. This trend is evident in the generation interconnection queues across U.S. balancing authorities, where applications for natural gas projects have more than doubled, and battery storage leads in proposed capacity. Meanwhile, solar applications are declining as operators grapple with concerns about deliverability. As a result, the outlook for natural gas generation appears robust, reflecting industry sentiment that companies will likely consider as they plan for their operational and proposed assets."
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