Article / 26 October 2012 at 8:47 GMT

Oil companies feature in next week's earnings releases: PDF list

Head of Equity Strategy / Saxo Bank
Denmark

We pointed out that this earnings season would be disappointing before it even started, and it has been. More evidence of this came last night, with weaker reports from Amazon and Apple, two of this world's most dominant IT companies.

In the S&P 500, sales and cash flow have been the trigger for investors pushing stock prices down. The sales surprise ratio in the S&P 500 is right now 40.8 percent and aggregate cash flow from operations is down almost 9 percent from last year.

Next week's earning releases will be about oil companies with behemoths like BP, Eni, Total, Royal Dutch Shell, Exxon Mobil and Chevron reporting. All of them except Chevron have seen earnings estimate rise over the last three months as Brent crude prices have climbed higher since the low point back in June. The average Brent crude oil price in the third quarter is on par with the second quarter but slightly less than first quarter (see chart below). So far this year the Brent crude has averaged 111.90 versus 110.60 in 2011, so this year looks to be a good year for big oil.

Oil prices in 2012

Source: Bloomberg L.P.

Big integrated oil companies have also underperformed the MSCI World Index the last year (see chart) and with somewhat stabilising macroeconomic indicators around the world these companies might be worth looking at. Their valuation is also benign measured by EV/EBITDA (4.9) and P/E (9.1). However for valuation to go up we need to see a significant jump in the ROIC/WACC spread (the return on capital minus the cost of capital) which is still low among oil companies at the moment.

Global oil stocks performance vs. MSCI

Source: Bloomberg L.P.

Read the full earnings publication with next week's earnings releases, including estimates and change in estimates, by downloading the attached PDF.

Download document

Earnings Releases 10292012-11042012

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