Sector Update: Energy Stocks Rise Late Afternoon

Energy stocks were mixed Thursday afternoon, with the NYSE Energy Sector Index rising 0.2% and the Energy Select Sector SPDR Fund (XLE) easing 0.1%.

The Philadelphia Oil Service Sector index dropped 1%, and the Dow Jones US Utilities index was adding 0.3%.

US crude oil stocks, including those in the Strategic Petroleum Reserve, rose by 2.7 million barrels in the week ended Nov. 8 following an increase of 3.5 million barrels in the previous week. Excluding inventories in the SPR, commercial crude oil stocks rose by 2.1 million barrels, as they did in the previous week, a larger gain than the 1.6-million-barrel increase expected in a survey compiled by Bloomberg.

Front-month West Texas Intermediate crude oil was declining 0.4% to $68.16 a barrel while the global benchmark Brent crude contract eased 0.3% to $72.03 a barrel.

US natural gas stocks rose by 42 billion cubic feet in the week ended Nov. 8, above the 39 billion gain expected in a survey compiled by Bloomberg and following an increase of 69 billion cubic feet in the previous week.

Henry Hub natural gas futures slumped 5.5% to $2.82 per 1 million BTU.

In corporate news, PHX Minerals shares popped 3.2% after the company said Thursday that its board has rejected WhiteHawk Energy's takeover proposal via an all-cash deal of $4 per PHX share.

Maxeon Solar Technologies shares tumbled past 14% after the company said that its solar panels continue to be detained and blocked from being imported into the US from its plants in Mexico by US Customs and Border Protection.

Ovintiv shares gained 3.7% after the company said it has agreed to buy some assets in Alberta Montney from Paramount Resources in an all-cash deal of $2.38 billion.

Drilling Tools International Corp. (DTI) came out with quarterly earnings of $0.14 per share, beating the Zacks Consensus Estimate of $0.06 per share. This compares to earnings of $0.14 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 133.33%. A quarter ago, it was expected that this company would post earnings of $0.12 per share when it actually produced earnings of $0.10, delivering a surprise of -16.67%.

Over the last four quarters, the company has surpassed consensus EPS estimates just once.

Drilling Tools International Corp., which belongs to the Zacks Oil and Gas - Field Services industry, posted revenues of $40.09 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 3.85%. This compares to year-ago revenues of $38.14 million. The company has not been able to beat consensus revenue estimates over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Drilling Tools International Corp. Shares have added about 9.4% since the beginning of the year versus the S&P 500's gain of 25.5%.

What's Next for Drilling Tools International Corp.

While Drilling Tools International Corp. Has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Drilling Tools International Corp. Unfavorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #4 (Sell) for the stock. So, the shares are expected to underperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.09 on $44.16 million in revenues for the coming quarter and $0.37 on $161.8 million in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Oil and Gas - Field Services is currently in the top 32% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Maxeon Solar Technologies, Ltd. (MAXN), another stock in the broader Zacks Oils-Energy sector, has yet to report results for the quarter ended September 2024.

This company is expected to post quarterly loss of $11.50 per share in its upcoming report, which represents a year-over-year change of +94.8%. The consensus EPS estimate for the quarter has been revised 25% higher over the last 30 days to the current level.

Maxeon Solar Technologies, Ltd.'s revenues are expected to be $94.6 million, down 58.4% from the year-ago quarter.

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