26 – 30 July | Earnings Season Part 3: Energy Sector

For this third part of our series, we take a look at the energy sector and the challenges facing companies in the oil, gas and energy industry.

This week is also loaded with more tech names like Apple, as well as big pharmaceutical companies like Pfizer. Check out the calendar at the end of this article for all the details.

Oil industry update

Before we talk about the specific companies, we need to understand the bigger picture going on in the energy sector, and particularly in oil production. And it all revolves around OPEC+.

OPEC+ is the Organisation of the Petroleum Exporting Companies and its allies. The group meets regularly to take stock of the global supply and demand for black gold. They also address any geopolitical issues that might be affecting prices, like the relationship between the US and Iran, for example.

During the recent health crisis, the oil price actually turned negative due to a drop in demand linked to the lockdowns. Since then, OPEC+ has been trying to find the right balance of supply. Last week, OPEC+ made an important decision to increase oil production to 400,000 barrels per day, every month, starting in August. Also, new production quotas were set in Iraq and Saudi Arabia. After the announcement, oil prices fell 5%, partly due to concerns over the new Delta variant.

Analysts have been waiting for a consensus, at least in the short-term, until the next meeting on September 1st. Now that we know the bigger picture, what can you expect from the companies in this sector?

Oil and gas companies to follow this week

There are four major oil and gas companies reporting earnings this week.

First, Royal Dutch Shell presents its figures on Thursday, July 28th. The company has already announced strong cash flow which is expected to continue. As much as 20-30% of this cash flow could be used to buy back shares, rather than increase dividends. Above all, analysts see this as a sign of solid quarterly results.

On Friday, July 29th,  Exxon Mobil, Chevron and Linde – three companies in the oil and gas sector – will publish their profits. Exxon is expected to report a particularly optimistic second quarter with profit growth to the tune of $1 billion year-on-year.

As for Chevron, sales should come in around $34.22 billion, an increase of 153.58% compared to the second quarter of 2020. In case there’s any doubt, the recovery is already here!

Finally, the US-German gas company Linde is expected to surprise shareholders again with earnings-per-share of $2.26 for the second quarter, up 10.18% from the previous quarter.

Will Tesla meet big expectations?

Let’s leave the oil and gas fields and move into the world of electricity. On Monday, July 26th, we’ll get quarterly results from Tesla. Elon Musk’s company managed to deliver more than 200,000 vehicles in the second quarter, and the share price rose 330% between May 2020 and May 2021. However, earnings-per-share is only expected to increase by one cent, from $0.95 to $0.96.

The outlook for Tesla remains positive, with a clear improvement in production capacities and the release of new models that attract significant demand (for example, Model Y registrations increased by 700% in the last quarter).

Your dictionary for earnings season

In this BUX Breakdown, we’ve talked about share buybacks, earnings-per-share and cash flow. If you’re interested in learning more about these terms and financial lingo more broadly, we’ve put together a dictionary guide for you to refer to at any time.

Economic and results calendar

Monday – Data from the Ifo Business Climate indicator in Germany. Quarterly figures from Tesla, LVMH.

Tuesday – Unemployment data in France. Quarterly figures from Apple, Alphabet, Starbucks, Visa, AMD.

Wednesday –  Consumer confidence in France, Germany and Italy. Federal Reserve decision on interest rates. Quarterly figures from Facebook, Pfizer, McDonald’s, Boeing.

Thursday – GDP growth for the second quarter in the United States. Unemployment rate in Spain and Germany. Consumer confidence and economic sentiment in the euro zone. Year-on-year inflation rate in Germany. Quarterly figures from Shell, Volkswagen, Amazon, AstraZeneca, Merck & Co.

Friday – Inflation rate and GDP growth in France. Inflation rate in the euro area (year-on-year). Quarterly figures from Linde, Fresenius Medical Care, Exxon Mobil and Chevron.

We’ll be back next week with another edition of the BUX Breakdown. Until then, have a great week on the stock market!

The BUX Breakdown was written by Clémentine Pougnet.

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All views, opinions, and analyses in this article should not be read as personal investment advice and individual investors should make their own decisions or seek independent advice. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication.