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Why Hess Stock Fell despite Better-than-Expected 2Q16 Earnings

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Hess’s stock performance

Following Hess Corp’s (HES) 2Q16 earnings release on July 27, its stock fell 3.8%. YoY (year-over-year), HES has fallen ~12.5%. In this part of the series, we’ll analyze Hess’s stock performance with respect to movements in the broader industry and the broader market.

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Peer comparison

Meanwhile, Continental Resources (CLR) has seen its stock price increase ~26% year-over-year. On the other hand, Apache (APA) and Newfield Exploration (NFX) have seen their stock prices increase ~12% and 34%, respectively, on a YoY basis.

As the graph above shows, HES’s performance has been driven mainly by WTI (West Texas Intermediate) crude oil prices (OIL). Along with natural gas prices (UNG) it has also been driving the broader industry ETF, the Energy Select Sector SPDR ETF (XLE).

From July 14 to July 28, Hess’s stock was underperforming the Energy Select Sector SPDR ETF (XLE), and it ended up giving lower returns at the end of the period. HES’s stock fell 10% during this period while XLE fell by 3.7%.

Both XLE and HES’s stock underperformed the SPDR S&P 500 ETF (SPY), which increased 0.3% during this period.

HES’s stock fell ~4% on July 27 despite better-than-expected earnings. Concurrently, crude oil prices fell 2.3% on July 27. So the drop in HES’s stock may have been due to the drop in crude oil prices rather than a result of negative market reaction to its earnings results. On July 28, HES stock increased 1% despite crude oil prices dropping a further 2% on July 28. This change shows that the markets reacted positively to Hess’s earnings the day after its 2Q16 release.

Read the first part of this series to learn more about Hess’s 2Q16 performance.

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