GOLDMAN: The Energy Sector Will Surprise Everyone During Earnings Season

Earnings for S&P 500 energy companies are expected to plunge by 21 per cent year-over-year during this earnings season.

However, analysts at Goldman Sachs thinks expectations are way too low.

“We believe S&P 500 earnings will benefit from positive surprises in Energy, where revisions have been too negative.”

In Q2, energy sector earnings estimates for the second half of 2012 fell 12 per cent due to 20 per cent decrease in the price of oil.

However, brent crude prices spiked 15% during 3Q. Consensus EPS estimates rose only minimally in response, suggesting that future upwards revisions to energy EPS are coming.

Here’s Goldman’s graph of Brent crude prices and EPS estimates:

brent

Photo: Goldman Sachs

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