It has been a wild ride for the energy sector so far in 2016. The space started the year with losses in excess of 10%, but came roaring back to breakeven to close out the quarter.
But now with oil prices sliding back again to start April, more questions are starting to appear for stocks in the space. A great example of the building worries as of late is EOG Resources (EOG), a stock that has followed the overall sector trend in the energy sector lately, but may be primed for pain in the month ahead.
EOG in Focus
EOG operates in the volatile exploration and production segment of the energy world. This area is among the biggest gainers when prices are rising, but if oil prices fall, these often feel the brunt of the pain.
Oil prices are sliding back as of late, and they definitely aren’t where many exploration and production companies need them to be in order to generate fat profits. This is especially important for EOG because the company is now operating at a loss, and it is seeing huge declines in year-over-year comparisons.
EOG actually posted EPS of six cents last year, and it is now projected to see a loss of $2.15/share thanks to sliding estimates and a sluggish industry outlook. In fact, the vast majority of the most recent estimates have been sharply lower and the trend has been downright awful. Just ninety days ago, the analyst consensus called for a loss of 10 cents per share, but now we are at that $2.15/share level, representing a massive decline in expectations as of late.
As you may or may not know, this kind of drastic decline is exactly what we look to avoid here at Zacks. No wonder the stock currently has a Zacks Rank #5 (Strong Sell) and we are looking to avoid this company in the near term.
Other Picks
If you are dead-set on staying in this corner of the energy industry, you might actually be in luck. The oil exploration/production segment actually has an industry rank in the top 25% so there are actually several decent choices for investors in this market (besides EOG of course), including more than a dozen stocks that currently have a rank of ‘buy’.
One that stands out is Antero Resources (AR), a stock that is expected to see EPS growth of over 115% this year. Additionally, this stock has a Zacks Rank #1 (Strong Buy) and is thus in the top 5% of all of the securities we cover. So, if you are looking to stay in the oil exploration market, make sure to consider AR instead of the in-trouble EOG this earnings season.
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