By Alex Kimani
- Earnings season is upon us once again, although no energy companies have reported their Q3 earnings yet.
- Two oilfield service giants are set to report earnings this week, with one of them predicted to overperform and the other one set for disappointment
- Both Next Era Energy and Next Era Energy Partners are set to report earnings this week, with the subsidiary expected to perform the better of the two
Earnings season is here with us once again, and at time of writing, with nearly 10% of S&P 500 companies having reported third-quarter 2021 earnings. According to FactSet data, 80% have reported actual EPS above estimates, with earnings coming in 14.7% above Wall Street estimates. No energy company has returned its Q3 2021 scorecard yet, but five are expected to do so this week. The energy sector is expected to post another blowout quarter in large part due to an increase in oil and gas prices.
The sector reported Q2 2021 earnings of $13.9 billion compared to a loss of -$10.6 billion in Q2 2020, thanks to vast improvements in commodity prices especially crude, which averaged $66.17/bbl in Q2 2021 compared to $28/bbl in Q2 2020 and $61/bbl in Q1 2021. American oil and gas supermajors ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX) were the largest contributors to the improved earnings for the sector, with the two companies accounting for $13.3 billion of the $24.6 billion year-over-year increase in earnings for the sector.
All five sub-industries of the energy sector, namely Integrated Oil & Gas, Oil & Gas Exploration & Production, Oil & Gas Refining & Marketing, Oil & Gas Equipment & Services, and Oil & Gas Storage & Transportation reported a year-over-year increase in earnings.
Hydrogen fuel cell maker Plug Power (NASDAQ:PLUG) is expected to report third quarter earnings on Nov. 8, but has already provided next year's revenue guidance.
PlugPower issued FY 2022 sales guidance of $825M-$850M, good for a ~65% increase over 2021 and above the $759M analyst consensus estimate, and forecasts 2025 sales of $3B. The company says it expects to generate $1 billion in revenue from material handling and $700 million from hydrogen fuel and says it can generate 30% gross margins from hydrogen fuel sales at $6/kilogram.
Here are five energy earnings to watch this week.
1. NextEra Energy
NextEra Energy (NYSE:NEE) is scheduled to report third-quarter 2021 earnings on Wednesday, Oct. 20 before the market opens.
The Florida-based utility has a consensus EPS forecast of $0.72, good for a 7.5% Y/Y improvement, while the consensus revenue of $5.73 billion marks a 19.7% Y/Y increase. NEE has beat earnings expectations for six straight quarters.
According to Zacks analysts, the company's upcoming report will likely reflect the benefits from an improvement in Florida's economic conditions after the rollout of vaccines. The company's consistent investment in technology, improving reliability, and utility bills lower than the national average have been helping NextEra win more customers.
Further, the company completed its SolarTogether program in the second quarter, which is likely to positively impact third-quarter performance.
2. NextEra Energy Partners
NextEra Energy Partners, L.P. (NYSE:NEP) is one of NextEra Energy's subsidiaries. NextEra Energy Partners owns interests in dozens of wind and solar projects in the United States, as well as natural gas infrastructure assets in Texas. These contracted projects use leading-edge technology to generate energy from the wind and the sun.
NEP is scheduled to report earnings also on Wednesday, Oct. 20, before the market opens. The consensus EPS forecast for the quarter is $0.64, a drop from $0.76 reported for last year's corresponding quarter.
KeyBanc analyst Sophie Karp has assigned an Overweight rating with an $89 target for NEP shares (13.5% upside), saying the company's high-quality portfolio of renewable assets and heavily contracted cash flow with a pipeline of assets through sponsor NextEra Energy positions NEP for multiple years of double-digit distribution growth.
3. Schlumberger
Oil field services giant Schlumberger N.V. (NYSE:SLB) is expected to report earnings on Friday, Oct. 22, before market open. Wall Street has a consensus EPS forecast of $0.36 for the company, a 125% increase over last year's $0.16.
SLB shares have been on a tear after the company revealed that it was awarded a "significant contract" by Turkish Petroleum for engineering, procurement, construction, and installation work for the Sakarya gas field, the largest gas reserve ever discovered in Turkey. Schlumberger says it will deliver the well completions scope and the design, construction, and commissioning of the early production facility capable of handling up to 350M scf/day of gas.
4. Haliburton
Another oil field services company, Halliburton (NYSE:HAL), is scheduled to report earnings on Tuesday, Oct. 19 before market open. The company has a consensus EPS forecast of $0.28 compared to $0.11 posted in last year's corresponding period.
UBS is the latest analyst to chime in on HAL, assigning the company a Sell rating but raising its estimates based on a positive contribution from Completion & Production and Drilling & Evaluation divisions, on higher North American and "improving" international activity. The bank's $13 price target implies a 17% downside from current levels.
5. Duke Energy
Charlotte-based electric and gas utility Duke Energy (NYSE:DUK) is scheduled to report earnings on Nov. 11, before market open. Wall Street has a consensus EPS forecast for the quarter of $1.81 compared to last year's $1.87, while third-quarter revenue is expected to clock in at $7.01B vs. $6.72B last year.
The company recently unveiled plans to build the 207 MW Ledyard Wind Power project in Iowa, the company's first renewable energy project in the state.
Duke has entered a 15-year virtual power purchase agreement with Verizon (NYSE:VZ) for 180 MW of wind energy generated by the project to support the company's sustainability goals. The project will provide enough renewable energy to power the equivalent of more than 72,000 homes and increase Duke Energy Sustainable Solutions' U.S. wind capacity to more than 3.1 GW.
A total of 10 equities research analysts have rated the stock with a hold rating, while three have given a buy rating. Duke Energy currently has a consensus rating of "Hold" and a consensus price target of $104.67, good for a 6% upside to the current price.
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