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Can Anadarko Petroleum’s 2Q17 Earnings Revitalize Its Stock?

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Part 3
Can Anadarko Petroleum’s 2Q17 Earnings Revitalize Its Stock? PART 3 OF 5

How Anadarko Petroleum’s 2Q17 Earnings Could Affect Its Stock

Anadarko Petroleum’s stock performance

Anadarko Petroleum (APC) stock has mostly been in a downtrend since the beginning of 2017, as have most of the energy stocks. Since the start of this year, Anadarko Petroleum’s stock has fallen ~38%.

The Energy Select Sector SPDR ETF (XLE) has fallen ~16% year-to-date. Meanwhile, the S&P 500 SPDR ETF (SPY) has risen 7.6% in the same period.

How Anadarko Petroleum’s 2Q17 Earnings Could Affect Its Stock

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As the graph above notes, Anadarko Petroleum’s stock performance has been driven primarily by the movement in crude oil prices (UCO). Crude oil prices and natural gas prices movements (UGAZ) have also been driving the Energy Select Sector SPDR ETF (XLE).

Energy prices

While weak energy prices have brought about the decline in energy stocks, including APC, the drop in crude oil is considerably lower than the actual decline in APC stock.

Crude oil prices have fallen only ~15% year-to-date, compared to APC’s ~38% decline in the same period. The year-to-date correlation between Anadarko Petroleum’s stock price and WTI crude oil prices is ~0.87, which indicates a strong positive correlation.

Correlation indicates the degree to which two entities or variables (in our case, the stock price of APC and crude oil prices) move in relation to each other. As a result, movements in APC stock show a significant positive correlation to movement in crude oil prices. In other words, when crude oil prices decline, APC stock is also bound to fall.

Investors should watch APC stock as it gets ready to release its 2Q17 earnings. The stock had reacted negatively to its 1Q17 earnings despite better-than-expected revenues. To learn more, please read Anadarko Petroleum’s 1Q17 Earnings Miss, Revenue Beats.

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