Energy ETFs Continue Climbing – Here’s Why
This article was originally published on ETFTrends.com.
The Energy Select Sector SPDR (XLE) , the largest equity-based energy ETF, rallied again last Friday, extending its 2019 gains to over 11%. That after the previously downtrodden energy sector notched one of its best January showings on record.
Investors cheered fourth-quarter earnings from Dow components Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX) , two stocks that combine for about 40% of XLE's roster.
Exxon Mobil, the largest U.S. oil company, said “net income fell to $6.00 billion, or $1.41 a share, from $8.38 billion, or $1.97 a share, in the same period a year ago, which included a $5.9 billion benefit from tax reform. The FactSet consensus for earnings per share was $1.08. Total revenue rose to $71.90 billion from $66.52 billion, below the FactSet consensus of $72.53 billion, while production increased to 4.01 million oil-equivalent barrels per day from 3.99 million, topping expectations of 4.00 million,” reports MarketWatch.
The energy sector was one of the worst-performing groups in the S&P 500 in 2018, as highlighted by an annual decline of 18.20% for XLE. With oil prices needing positive catalysts, the ability of OPEC to lower output is critical for the commodity’s near-term fortunes. Likewise, some market observers are concerned about U.S. shale producers keeping output high as prices decline.
There's More for Chevron
Chevron, the second-largest U.S. oil and the number two holding in XLE behind Exxon, also reported solid fourth-quarter results.
“Chevron reported a profit of $3.7 billion, or $1.95 per share, compared with $3.11 billion, or $1.64 a share a year earlier. Analysts' mean forecast was $1.87 a share, according to Refinitiv,” reports Reuters.
Investors leaning toward value stocks could also boost XLE as 2019 moves forward.
““A lot of the energy stocks still look good both from a valuation and dividend yield perspective and we like both of these, even though fundamentally they’re very different,” said Erin Gibbs, portfolio manager at S&P Global in an interview with CNBC. “They’re part of that whole value play and actually value has been keeping up and actually slightly outpacing the broader market.”
For more information on the oil market, visit our energy category.
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