With the slow but steady decrease in oil prices over the last couple of months, analysts predict that the energy industry is going to see a severe decline in profits.
Currently, analysts expects S&P 500 energy sector earnings to plunge 14.6% to $9.49 per share in Q4, which compares to the 6.6% increase to $11.94 expected in September 30. According to Butters, this represents "the largest decline in the EPS estimate for the Energy sector during a quarter since Q1 2009."
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Lower price trends for oil at this moment can be expected. As we know a sharp decline in Oil barrel prices to 70$ per barrel is a very significant reason as to the plunge in earnings.
ReplyDeleteOne has to wonder whether or not the energy industry will respond with mergers and acquisitions. Such has been the case in the 1980s, 90s and 00s when oil prices crashed. When oil prices hit such low levels, giants firms picked up smaller companies. It will be interesting to see whether or not history will repeat itself.
ReplyDeleteAs the prices for oil continue to decline, below $70 now, smaller production facilities will not be able to continue production. These companies will be bought up by other companies in the industry, which will see a rise in the prices again over time. It will interesting to see the sector earnings percent and its per share value a year from now to see if the decline continues or if there will be a rebound. The lowered growth rate does not indicate that the industry is decline, rather that prices have been lowered by the surplus of supply.
ReplyDeleteAccording to a few articles I've seen, low oil prices are already starting to affect solar panel and electric car companies. It's definitely likely that the decrease in oil prices are going to have a significant impact on the energy industry as well.
ReplyDeleteI think the energy industry will bounce back. It isn't likely that oil production can remain this high for a long period of time. In the mean time the rest of the economy will benefit from the boosted consumption created through money consumers save at the pump.
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