Stocks in the S&P 500’s energy sector still have plenty of upside despite their 74% surge in the past 12 months, according to Jeff Buchbinder, chief equity strategist at LPL Financial.
The strong rally in energy shares, including those of oil giants Exxon Mobil Corp XOM and Chevron Corp., CVX compares with a 6.6% drop for the broader S&P 500 index SPX from a year ago, with energy and utilities helping offset blistering losses in other parts of the index. What’s more, positive signs of a potential accord to allow Iranian crude to flow freely again on the international market could be offset by production cuts from Saudi Arabia. As trader weighed the potential for an Iran deal, West Texas Intermediate crude for October delivery CL.1 fell $2.37, or 2.5%, Thursday to settle at $92.52 a barrel on the New York Mercantile Exchange.
Strong earnings momentum Energy was the clear winner of the second-quarter earnings season. Not only did energy generate the most earnings growth, it’s still on track to lead the S&P 500 in earnings for the year, according to Buchbinder. The sector also saw the most upward earnings revisions to 2023 earnings expectations.
Buchbinder said that doesn’t make sense, given the strong cash flow yields for the sector, which are topping 10%, more than double the level for the S&P 500. The S&P 500 energy sector includes more than 20 companies, including Exxon and Chevron, but also exploration companies like Devon Energy Corp. DVN and Halliburton HAL , which focuses on selling equipment to companies engaged in hydraulic fracturing, or “fracking.”
Good luck. Ruport Murdoch own this FEED and is heavy in Energy, go figure.
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