Expected Profit Growth For Energy Sector Is Enough To Make You Gasp
Source：Investor’s Business Daily
From：Taiwan Trade Center, Los Angeles
Update Time：2018/07/17
Let’s take a look at the current trend that is happening in the world today. The price of oil continues to climb higher and second quarter earning seems to be promising. Energy companies as a collective seems to be on track to increase earnings by as much as 139.8%, according to research firm CFRA. Crude oil is still the de facto determinant that influences all oil stocks; price for U.S. oil grazed $75 a barrel this past week, which marked the highest cost since 2014. Major oil-producing countries are keeping supplies from swelling, while supply constraint pops up in Iran, Libya and Venezuela; at the same time, producers are driving down the costs of production.
Among IBD's industry groups, U.S. exploration and production are in the top 20 of 197 groups.
Energy's expected profit growth is predicted to be the best by far of all business sectors, with the materials sector falling in at number 2. Financials and information technology are forecast to profit by about 21%.
Technology, however, still remains the market's big profit engine, and is currently headed for the seventh quarter in a row in which it has placed as one of the top three sector; in addition, it sees an eighth quarter with double-digit growth. Telecommunications is also seeing an increase by 15.2%, industrials by 14.1%, consumer discretionary by 13.4%, health care by 9.9% and consumer staples at 7.4%.
The S&P 500 as a collective is predicted to do well, and the CFRA sees another strong quarter of 19.5% growth. Historically, quarterly growth ends up 3.5 to 4.5 percentage points higher than initial estimates. That might put final earnings up 23%, on par with the 23.3% increase recorded in the first quarter.
"We expect this will be the second quarter in a row for earnings growth of greater than 20%, something that hasn't been recorded since 2010 (a result of a rebound in earnings off recessionary declines)," Bell wrote in a June 28 report. "This time the robust growth rate is a reflection of strong sales growth and reduced tax rates from the new tax policy."
Revenue for the S&P 500 is expected to increase 8.9%. Materials is forecast to grow sales 30.3%, energy 19.7%, health care 14.7% and technology 11.4%. Consumer staples and utilities are the only sectors expected to report a decline in sales.