Ask Matt: How bad will energy profits get?
Q: How bad will energy profits get?
A: Not many consumers feel mercy for energy companies. But the sector is suffering from an epic profit meltdown with no end in sight.
The energy sector's 65% profit decline in the third quarter is a big reason why investors are prepared for the first earnings decline since 2009. Companies in the Standard & Poor's 500 are expected to post 2.4% lower adjusted profit during the quarter, says S&P Capital IQ. But if you took energy companes out, profit would be up 5.9%. Even the biggest oil company in the S&P 500 can't escape the profit sinkhole. Exxon Mobil reported on Oct. 30 an adjusted profit of $1.01 a share, which was 12% better than expected. But that was still down 46% from year-ago levels. The energy sector, battered by falling commodity prices, is expected to see profits slide for at least the next three quarters, says S&P Capital IQ. Energy sector profits are seen falling 68% in the fourth quarter, 39% in the first quarter of 2016 and 25% in the second quarter. Analysts have slapped "hold" ratings on many energy stocks, including Exxon, as industry profits slide. Eventually there will be a bounce, but it could be many years before energy companies see profits reach 2014 levels.
Paste BN markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at mkrantz@usatoday.com or on Twitter @mattkrantz.