S&P 500   4,594.63
DOW   36,245.50
QQQ   389.94
Man kills 4 relatives in Queens knife rampage, injures 2 officers before he's fatally shot by police
New CBOE “special perk” helps traders target income every weekend (Ad)
British military reports an explosion off the coast of Yemen in the key Bab el-Mandeb Strait
Lacking counselors, US schools turn to the booming business of online therapy
New CBOE “special perk” helps traders target income every weekend (Ad)
Hong Kong court puts off Chinese developer Evergrande's hearing on its debt restructuring to January
Kiss say farewell to live touring, become first US band to go virtual and become digital avatars
New CBOE “special perk” helps traders target income every weekend (Ad)
Alaska Air to buy Hawaiian Airlines in a $1.9 billion deal that may attract regulator scrutiny
Watchdog: Western arms companies failed to ramp up production capacity in 2022 due to Ukraine war
S&P 500   4,594.63
DOW   36,245.50
QQQ   389.94
Man kills 4 relatives in Queens knife rampage, injures 2 officers before he's fatally shot by police
New CBOE “special perk” helps traders target income every weekend (Ad)
British military reports an explosion off the coast of Yemen in the key Bab el-Mandeb Strait
Lacking counselors, US schools turn to the booming business of online therapy
New CBOE “special perk” helps traders target income every weekend (Ad)
Hong Kong court puts off Chinese developer Evergrande's hearing on its debt restructuring to January
Kiss say farewell to live touring, become first US band to go virtual and become digital avatars
New CBOE “special perk” helps traders target income every weekend (Ad)
Alaska Air to buy Hawaiian Airlines in a $1.9 billion deal that may attract regulator scrutiny
Watchdog: Western arms companies failed to ramp up production capacity in 2022 due to Ukraine war
S&P 500   4,594.63
DOW   36,245.50
QQQ   389.94
Man kills 4 relatives in Queens knife rampage, injures 2 officers before he's fatally shot by police
New CBOE “special perk” helps traders target income every weekend (Ad)
British military reports an explosion off the coast of Yemen in the key Bab el-Mandeb Strait
Lacking counselors, US schools turn to the booming business of online therapy
New CBOE “special perk” helps traders target income every weekend (Ad)
Hong Kong court puts off Chinese developer Evergrande's hearing on its debt restructuring to January
Kiss say farewell to live touring, become first US band to go virtual and become digital avatars
New CBOE “special perk” helps traders target income every weekend (Ad)
Alaska Air to buy Hawaiian Airlines in a $1.9 billion deal that may attract regulator scrutiny
Watchdog: Western arms companies failed to ramp up production capacity in 2022 due to Ukraine war
S&P 500   4,594.63
DOW   36,245.50
QQQ   389.94
Man kills 4 relatives in Queens knife rampage, injures 2 officers before he's fatally shot by police
New CBOE “special perk” helps traders target income every weekend (Ad)
British military reports an explosion off the coast of Yemen in the key Bab el-Mandeb Strait
Lacking counselors, US schools turn to the booming business of online therapy
New CBOE “special perk” helps traders target income every weekend (Ad)
Hong Kong court puts off Chinese developer Evergrande's hearing on its debt restructuring to January
Kiss say farewell to live touring, become first US band to go virtual and become digital avatars
New CBOE “special perk” helps traders target income every weekend (Ad)
Alaska Air to buy Hawaiian Airlines in a $1.9 billion deal that may attract regulator scrutiny
Watchdog: Western arms companies failed to ramp up production capacity in 2022 due to Ukraine war

Is It Too Late For Energy Stocks? 

Is It Too Late For Energy Stocks? 

It Is Not Too Late To Buy Energy Stocks 

If you are wondering about oil prices, the energy market, and whether it's too late to buy Energy Stocks (NYSEARCA: XLE) we’re here to tell you no. Absolutely not. There are too many fundamentally bullish factors at play that we see Energy Stocks leading the market for the next few quarters. To put it simply, high oil prices are here to stay. The combination of trillions in stimulus on a dollar-based commodity, tightening global capacity, and rising demand have us in the most bullish oil market we can remember. The recent opening of China following their second round of COVID lockdowns is only going to exacerbate the problem and the problem has WTI on track to set a new all-time high fairly soon and that means profits for Energy Stocks. 

When it comes to the Energy Stocks, it's going to be all in the earnings, the revisions to the earnings outlook, windfall profits, and the fact that WTI is tickling the recent highs. We don't see any reason for WTI to correct even with a broader economic recession because demand for labor is still so high. Some companies are pulling back on hiring plans, sure, but Challenger,  Gray & Christmas show this will be a record year for hiring intent if not actual jobs. But, back to energy, low valuation, wicked high profits, share buybacks, dividends, and balance sheet improvement is going to drive this market higher. 

Energy Stocks Are Cheap, And High-Yielding 

Exxon Mobil (NYSE: XOM) and Chevron NYSE: CVX, the top two holdings in the XLE Energy Sector ETF and nearly 43% of the holdings, are trading at an average of 10.5X their earnings and yielding an average of 3.275% with both paying more than 3%. This valuation is compounded by revenue and earnings that are at the highest levels in over a decade and are expected to continue growing on a YOY basis at least. Turning to the consensus earnings estimate for the Energy Sector, the sector is expected to grow earnings by more than 200% in the 2nd quarter and there is ample risk of an upside surprise. Not only did the sector produce 245% growth in Q1 but it beat the consensus by 2300 basis points and oil prices are still rising. 


Farther out, there are some clouds on the horizon in the form of next year's earnings growth but take that with a grain of salt. Energy sector earnings are, right now, expected to decline by about 10% in 2023 but this is against a better than 110% increase this year. The takeaway, however, is that the full-year 2022 and full-year 2023 outlook for earnings haven’t seen nearly the amount of upward revision as Q1 and Q2 which leads us to believe both estimates are going to track higher over the next two to three quarters. 

The Analysts Are Upgrading Energy Stocks 

The analysts are still rating Exxon and Chevron as a Hold and Weak Buy but the price target revisions and upgrades have been rolling in. In regards to the sector, the Energy Sector is the most upgraded sector by far with 12 companies in the top 20 Marketbeat.com Most Upgraded Stocks. And Exxon and Chevron are in the group and moving higher along with it. Turning to the chart of the XLE Energy Sector ETF, this chart is moving higher and showing no signs of slowing down. The monthly action is the most telling with MACD setting an Extreme Peak that is convergent with a new high. In this scenario, we might see a pullback in the price action on a weekly or daily basis but it won’t last long and a move to new all-time highs is highly probable. 

Is It Too Late For Energy Stocks? 

Should you invest $1,000 in Energy Select Sector SPDR Fund right now?

Before you consider Energy Select Sector SPDR Fund, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Energy Select Sector SPDR Fund wasn't on the list.

While Energy Select Sector SPDR Fund currently has a "hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

13 Stocks Institutional Investors Won't Stop Buying Cover

Which stocks are major institutional investors including hedge funds and endowments buying in today's market? Click the link below and we'll send you MarketBeat's list of thirteen stocks that institutional investors are buying up as quickly as they can.

Get This Free Report

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Energy Select Sector SPDR Fund (XLE)N/A$85.02+0.5%3.79%6.92N/AN/A
Exxon Mobil (XOM)
3.3021 of 5 stars
$102.99+0.2%3.69%10.23Moderate Buy$129.65
Chevron (CVX)
3.2537 of 5 stars
$144.81+0.8%4.17%10.75Moderate Buy$187.89
Compare These Stocks  Add These Stocks to My Watchlist 

Thomas Hughes

About Thomas Hughes

  • tmhughes.writeon@gmail.com

Contributing Author

Technical and Fundamental Analysis

Experience

Thomas has been a contributing writer for MarketBeat since 2019.

Areas of Expertise

Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies

Education

A.A., culinary technology

Past Experience

Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights. 


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