What Do Analysts Estimate for the Upstream Sector?
Analyzing 2015 Performance and 2016 Outlook for the Energy Sectors
Moving average
As of December 29, 2015, the 100-day moving averages of upstream companies’ stocks showed strong resistance. For example, only Pioneer Natural Resources (PXD) managed to trade above the 100-day moving average before December 15. Now, it’s trading 5.2% below its 100-day moving average. Also, EQT (EQT) and Cabot Oil & Gas (COG) were trading 21% and 18% below their 100-day moving averages, respectively, as of December 29. Upstream companies were also trading well below their 20-day moving averages.
Pioneer Natural Resources was trading above its respective 20-day moving average until December 15. It fell 8.2% below the moving average after that. Also, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) was trading 15.3% below its 100-day moving average.
Wall Street analysts’ consensus estimate
The above graph shows several upstream companies’ moving averages and forward target prices. Wall Street analysts’ consensus estimate suggests a 44% upside for these upstream companies compared to a 25% upside for large-cap refineries. Over the next 12 months, EQT and Cabot Oil & Gas could see rises of 53% and 45%, respectively, from December 29 levels. Wall Street analysts’ estimates for three other upstream companies over the next 12 months are as follows:
ConocoPhillips (COP) could see a 25% rise.
EOG Resources (EOG) could see a 27.5% rise.
Apache (APA) could see a 20.4% rise.
Interestingly, the forward PE (price-to-earnings) ratio for next year suggests that ConocoPhillips is comparatively cheaper than other upstream companies.
In the next part, we’ll analyze the growth of debt and weighted average cost of capital of debt for upstream companies.
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