So what’s rising in 2022? Oil stocks like Halliburton
Investors facing a down market might look at the stocks that are going up right now. The hot sector is oil, and three factors could keep oil stocks rising for a while.
A lot of the focus in the stock market lately has been on what’s down. The market has pulled back significantly in the last few months, and tech and growth stocks have taken the brunt of the beating. Some sectors are in a correction.
What stocks are bucking this trend?
We looked at data from Finviz to see which stocks were performing the best so far in 2022. Oil stocks have, by far, been the best-performing stocks in the S&P 500. And while past performance is no guarantee of future gains, there might still be room left to run for investors seeking gains while this pullback continues.
Top performers in the S&P 500 in 2022
As of Monday morning, the top 10 performers in the S&P 500 in 2022 were oil and oil-related stocks. On average, they’ve gained more than 25%, while the S&P dropped 6%.
Moreover, these stocks are all positive for the past quarter, six months and full year as well.
Here are the top 5 performers in the S&P 500 in 2022.
1. Halliburton Company: 37.12%
Halliburton Company (HAL) is an energy products and services company headquartered in Houston, Texas. It operates through the following segments: discovery, drilling, evaluation, completion and production.
Halliburton released its fourth-quarter 2021 financial results last Monday, reporting better-than-expected numbers. The company posted earnings per share of $0.36, compared to analyst estimates of $0.34, and revenue of $4.38 billion, compared to estimates of $4.09 billion. Its revenue was up 32% year over year and its earnings up 100%. For the full year, revenue was up 6% from 2020.
What’s next for Halliburton?
Halliburton stock has climbed 37.12% so far this year. Analysts expect Halliburton to post revenue of $18.18 billion in 2022, a 19% increase over last year, and earnings of $1.77 per share, up from $1.07 in 2021.
A solid 34 of 38 analysts covering Halliburton shares have called it a Strong Buy or Buy, versus just three Holds, one Underperform and no Sells of any kind.
2. Schlumberger: 32.49%
Schlumberger (SLB) is an oilfield technology services company based in Houston, Texas. It provides technology and services to the energy industry for reservoir characterization, drilling, production and processing.
Schlumberger’s fourth-quarter earnings, released January 21, beat analyst expectations. The company reported an 86% year-over-year jump in earnings to $0.41 per share with revenue up 13% to $6.23 billion. This compares to analyst estimates of $0.39 in earnings on $6.09 billion in revenue. Full-year revenue was $22.9 billion, down slightly from $23.6 billion posted in 2020.
What’s next for Schlumberger?
Shares of Schlumberger are up 32.49% year to date. Wall Street is forecasting total revenue of $23.5 billion in 2022, up 2.62% from 2021, and earnings per share of $1.74, which is an increase of 36% from 2021 earnings of $1.28 per share.
Of the 37 analysts covering the stock, 26 have called it a Strong Buy or a Buy, compared to 11 Holds and no Sells.
3. Occidental Petroleum: 29.60%
Occidental Petroleum (OXY) engages in the exploration and production of oil and natural gas in the United States, the Middle East, Africa and Latin America. The company is based in Houston, Texas.
Third-quarter earnings and revenue surpassed estimates. In November 2021, the company reported earnings of $0.87 cents per share, beating the analyst consensus estimate of $0.66. Occidental’s total quarterly revenue was $6.82 billion, surpassing estimates of $6.57 billion by 3.81%. Compare this to a loss of $0.85 in the same quarter in 2020 and quarterly revenue of $4.11 billion.
What’s next for Occidental?
Occidental Petroleum stock has gained 29.60% so far this year, and the company is scheduled to release its fourth-quarter 2021 earnings on February 25. Analysts expect Occidental to report fourth-quarter 2021 revenue of $7.28 billion, putting its full-year 2021 revenue at $25.75 billion. This would be 45% higher compared to 2020. Occidental is expected to post quarterly earnings of $1.08 per share and full 2021 earnings of $2.12. For 2022, analysts see Occidental’s earnings climbing to $3.35 per share and revenue climbing to $27.48 billion.
The stock is rated a hold, with seven of 24 analysts giving it a Strong Buy or Buy, versus 15 Holds, one Underperform and one Sell.
4. ConocoPhillips: 23.61%
ConocoPhillips (COP) is a Houston-based company engaged in hydrocarbon exploration and production. It’s one of the world’s largest independent exploration and production companies of crude oil and natural gas.
ConocoPhillips came out in November 2021 with third-quarter earnings of $1.77 per share, beating analyst estimates of $1.50. This compares to a loss of $0.31 per share a year ago. The company posted revenue of $11.62 billion for the quarter, versus estimates of $11.34 billion. This compares to year-ago revenue of $4.38 billion.
What’s next for ConocoPhillips?
ConocoPhillips is up 23.61% in 2022. Its fourth-quarter earnings are scheduled for February 3, and analysts expect the company to post quarterly revenue of $13.79 billion, a gain of 128% year over year. Earnings are expected to climb to $2.17 per share, compared to a loss of $.19 in the same quarter in 2020.
The stock is rated a buy, with 15 of the 21 analysts covering the stock giving it a Strong Buy or Buy, compared to just six Holds.
5. EOG Resources: 23.49%
EOG Resources (EOG) is an independent crude oil and natural gas company based in Houston, Texas. It operates in the US, China and Trinidad and Tobago — and recently obtained a permit to drill in Australia.
Most recently, EOG reported third-quarter 2021 earnings per share of $2.16, beating estimates of $2.04 by 5.88%. Third-quarter 2021 revenue rose to $4.77 billion from the year-ago figure of $2.25 billion.
What’s next for EOG Resources?
EOG investors have seen a 23.49% return so far this year, and the company is expected to announce its fourth-quarter 2021 financials on February 25. The Wall Street consensus estimates that EOG will report $5.9 billion in revenue for the quarter and $18.64 billion for the full year. This compares to $2.97 billion for the same quarter in 2020 and full 2020 revenue of $11.03 billion. The company is expected to report earnings of $3.19 per share for the quarter and $8.64 for the year. Shares of EOG Resources are currently rated a buy. Of the 35 analysts covering the stock, 21 give it a Strong Buy or Buy, while 14 give it a Hold. No analysts recommend selling the stock.
The next 5 best performers in the S&P 500 in 2022 are also oil stocks
Oil stocks make up the top 10 best performers in the S&P 500 so far in 2022. Here are how the next five on the list have fared.
- APA: 23.35%
- Exxon Mobil: 23.03%
- Hess: 22.92%
- Marathon Oil: 20.83%
- Diamondback Energy: 19.35%
Three main reasons are driving the growth.
1. Rising oil prices
Oil prices soared in 2021, giving a boost to the stocks of energy companies. When crude oil prices rise, oil stock prices tend to go up, too, because they derive their earnings from the amount of oil they sell.
West Texas Intermediate (WTI), ​​a crude oil that serves as one of the main global oil benchmarks, climbed 80% to a high of $85.64 per barrel in late October. Oil and natural gas prices ended 2021 59% higher than the first trading day of the year.
At the pump, Americans paid on average $3.10 per gallon in 2021, up from $2.26 in 2020, according to data provided by the US Energy Information Administration (EIA). These prices haven’t been seen since 2014.
2. A shift to cyclical stocks from higher-risk stocks
As the Federal Reserve gears up to increase interest rates this year to fight the red-hot inflation, investors have been moving out of higher-risk tech and growth stocks. Many of these stocks rely on the prospect of profits years in the future, and when rates rise, those future earnings become worth less in today’s money.
As a result, investors have been turning to stocks that should perform amid rising rates, such as cyclicals, ​​financial stocks and consumer staples. Energy stocks, in particular, do well during inflation. According to data from Fidelity, the energy sector has been positively correlated to inflation during every inflation wave since 1942.
3. Many energy stocks pay dividends, which are sought after in a down market
All 10 stocks on this list pay a dividend.
High-quality companies with a track record of consistent dividend payouts are often well-positioned to weather higher prices during levels of increasing inflation. Those that routinely raise their dividend payouts provide investors with a hedge against inflation.
The math is simple. If stock prices are flat, the dividend still gives you an annual return.
Will the gains continue?
We’re a month into 2022, and some analysts say a lack of production capacity and limited investment in the sector could lift oil prices even higher. OPEC+ producers have been raising output targets each month, but member yield disruptions have limited the organization’s ability to fully hit its quotas. OPEC+ is a group of 23 oil-producing nations, made up of the 13 members of the Organization of Petroleum Exporting Countries (OPEC) and 10 non-OPEC partner countries.
On the other hand, the EIA expects gas prices to fall in 2022 and 2023 as demand growth wanes and production picks up, which would likely negatively affect energy stocks. Either way, the Fed is signaling a year of rate hikes, which suggests inflation will be here a while. Investors are still rotating into cyclicals, and oil stocks seem to be favorites. Things will eventually rotate back, of course. But right now, oil stocks are making money.
At the time of publication, Matt Miczulski owned shares of XOM.
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