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The oil/energy sector has faced significant challenges in the first quarter of 2025, with shifting commodity prices and persistent market volatility affecting overall performance. Oil prices have fallen while natural gas prices have seen a slight uptick. This combination presents a complex and uncertain outlook, as the mixed performance of oil and natural gas prices complicates the sector's ability to achieve growth. With earnings expectations low, could some companies still outperform?
Let's take a closer look at three key players to understand their positioning as they head into their Q1 earnings reports.
In the first quarter of 2025, there was a sharp decline in oil prices. West Texas Intermediate crude's average price fell to $71.84 per barrel, down from the prior year's $77.56. This decline was mainly due to concerns over weaker global economic growth, an increase in oil supply from non-OPEC+ countries, potential production hikes from OPEC+, and lower-than-expected demand. Additional pressure came from escalating trade tensions and a build-up in oil inventories.
On the other hand, natural gas prices jumped significantly, with the Henry Hub spot price averaging $4.15 per million British thermal units ("MMBtu"), up from $2.13 per MMBtu in the prior-year quarter. This surge was largely attributed to colder-than-usual weather, which led to higher heating demand and significant withdrawals from storage. Moreover, increasing LNG exports further boosted demand and tightened supply, pushing prices higher.
The oil and energy sector continues to face challenges in the first quarter of 2025, even though the situation has slightly improved compared to the previous quarter. According to the latest Zacks Earnings Trends report, energy companies in the S&P 500 are expected to post a 12.9% drop in earnings from a year ago. While that’s better than the 22.4% decline seen in fourth-quarter 2024, it still reflects a tough environment for the sector. One of the main problems is that oil prices remain weak, and that’s outweighing the benefits from stronger natural gas prices, which have risen due to colder weather and growing LNG exports. On the revenue side, energy companies are projected to see a small decline of 0.3%, while the broader S&P 500 is expected to grow revenues by 3.8%.
If you take out energy, the index’s earnings would rise by a healthier 8.3%, and revenue growth would improve to 4.2%, showing just how much energy is dragging down overall results. The pressure on margins is also clear — energy companies are expected to generate about $26.6 billion in total earnings this quarter, down from $30.5 billion a year earlier.
Meanwhile, other sectors like medical, technology and utilities are seeing strong growth, putting energy in the company of other underperformers like autos, basic materials and industrial products.
Given this backdrop, let’s take a look at how the following oil and energy companies are set up ahead of their first-quarter earnings reports on May 1, and how they’re positioned to handle the current challenges.
Our proprietary model indicates that a company needs to have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of an earnings beat.
TC Energy Corporation TRP is scheduled to report quarterly earnings before the opening bell. The chances of a Calgary, Alberta-based oil and gas storage and transportation company delivering an earnings beat this time around are low, as it has an Earnings ESP of -0.35% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
TC Energy is a leading North American energy infrastructure company, focused on the development and operation of energy pipelines, storage, and power generation assets. With a strong commitment to sustainability and reliable service, TC Energy provides essential energy transportation solutions to meet the growing demand across the continent. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The Zacks Consensus Estimate for TC Energy’s earnings is pegged at 72 cents per share, suggesting a 21.74% decrease from the prior-year reported figure. Regarding earnings surprises, TRP’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, delivering an average surprise of 8.96%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
This is depicted in the chart below:
TC Energy Corporation price-eps-surprise | TC Energy Corporation Quote
Targa Resources Corp. TRGP is scheduled to report quarterly earnings before the opening bell. The chances of a Houston, TX-based oil and gas storage and transportation company delivering an earnings beat this time around are low, as it has an Earnings ESP of -4.12% and a Zacks Rank #3 at present.
Targa Resources is a leading independent midstream energy infrastructure company, specializing in the gathering, processing, transportation, and storage of natural gas and natural gas liquids across North America.
The Zacks Consensus Estimate for Targa’s earnings is pegged at $2.06 per share, suggesting a 68.85% increase from the prior-year reported figure. In terms of earnings surprises, TRGP surpassed the Zacks Consensus Estimate twice in the past four quarters and fell short twice, resulting in an average negative surprise of 3.09%.
This is depicted in the chart below:
Targa Resources, Inc. price-eps-surprise | Targa Resources, Inc. Quote
PBF Energy Inc. PBF is scheduled to report quarterly earnings before the opening bell. The chances of this gas equipment and services company based in New Jersey delivering an earnings beat this time around are low, as it has an Earnings ESP of 0.00% and a Zacks Rank #3 at present.
PBF Energy is a leading independent petroleum refining and logistics company, operating six refineries across the United States. The Zacks Consensus Estimate for PBF Energy’s earnings is pegged at $3.24 per share, suggesting a 476.74% decrease from the prior-year reported figure. Regarding earnings surprises, PBF’s earnings beat the Zacks Consensus Estimate once in the last four quarters and missed twice, delivering an average negative surprise of 24.41%.
This is depicted in the chart below:
PBF Energy Inc. price-eps-surprise | PBF Energy Inc. Quote
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This article originally published on Zacks Investment Research (zacks.com).
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