3 Energy Stocks Poised to Outshine Earnings Estimates in Q3

We are approaching the middle of the third-quarter earnings season, with several energy giants yet to report results. Since the energy business environment was favorable in the September quarter, thanks to high commodity prices, backed by the Iran war, BP plcBP, Chevron CorporationCVX and ExxonMobil Holdings CorporationXOM are likely to report better-than-expected earnings.

How Oil Prices Behaved in Q3

To understand how oil prices behaved in the September quarter, let's analyze the commodity prices from the data provided by the U.S. Energy Information Administration ("EIA"). The average Cushing, OK, WTI spot prices for July, August and September of this year were $80.46 per barrel, $83.90 per barrel and $97.31 per barrel, respectively, per EIA data. Commodity prices were $68.39 per barrel, $64.86 per barrel and $63.96 per barrel in the prior-year respective months, according to the EIA.

Investors should note that a more favorable crude pricing environment is likely to have aided the exploration and production businesses.

How to Pick the Right Stocks?

Given the backdrop, it is by no means easy for investors to arrive at picks that have the potential to deliver better-than-expected earnings from the vast universe of energy stocks.

While there is no fool-proof method of picking outperformers, our proprietary methodology — the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — helps identify stocks that have high chances of delivering a surprise in their upcoming earnings announcement. Our research shows that for stocks with this combination, the chance of an earnings surprise is as high as 70%.

The Earnings ESP shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Our Choices

BP, a British integrated energy giant, is likely to have benefited from a favorable commodity pricing scenario.

BP has an Earnings ESP of +7.13% and currently carries a Zacks Rank #1. It is scheduled to release third-quarter results on Oct. 30. You can see the complete list of today's Zacks #1 Rank stocks here.

BP p.l.c. Price and EPS Surprise

BP p.l.c. price-eps-surprise | BP p.l.c. Quote

Chevron Corporationis a well-known integrated energy company and is also likely to have benefited from high oil prices. The firm is scheduled to report earnings on Oct. 30, has an Earnings ESP of +3.36% and a Zacks Rank of 1.