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Integrated Energy Firms’ Estimates for 4Q17

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Jan. 12 2018, Updated 7:36 a.m. ET

Integrated energy firms’ 4Q17 estimates and rankings

In this series, we’ll rank integrated energy stocks in terms of Wall Street analysts’ earnings expectations for 4Q17. The four integrated energy companies being considered in this series are ExxonMobil (XOM), Chevron (CVX), Royal Dutch Shell (RDS.A), and BP (BP).

We ranked these companies based on their estimated year-over-year (or YoY) growth in earnings per share (or EPS) in 4Q17. We also analyzed where these stocks stand in terms of valuation, just ahead of their earnings releases.

As we rank these stocks on likely YoY EPS growth in 4Q17, Chevron (CVX) occupies the top slot. CVX is expected to post a huge rise in earnings—around 508.0% YoY growth. The last slot is occupied by XOM despite the fact that XOM is expected to post 13.0% YoY growth in EPS.

BP (BP) and Shell (RDS.A) rank second and third in terms of the expected rise in earnings in 4Q17.

Wall Street analysts expect a rise in earnings of these companies due to the fact that oil prices have risen YoY in 4Q17, pointing toward better upstream earnings. Refining margins stand higher year-over-year, as highlighted by the regional refining cracks and spreads.

In 4Q17, the US corporate tax rate was cut to 21.0%. This could also lead to a rise in these companies’ net incomes and cash flows.

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Valuations

If we consider the valuations of these companies, Chevron (CVX), which occupies the top slot, stands highest in terms of the forward price-to-earnings (or PE) ratio. Shell, which occupies the third spot, has the lowest valuation. Shell is progressing well with the integration of the acquired BG Group, but it has relatively higher debt levels.

ExxonMobil (XOM) has the second-highest valuation. XOM is a fundamentally stronger company with lower debt and surplus cash flows. We will discuss valuations, including forward valuations and PEG ratios, in detail later in the series.

Next, we’ll look at these companies’ 4Q17 estimated earnings, starting with CVX.

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