As we enter the fourth quarter, it seems that oil and gas prices remain stubbornly high for consumers. However, despite the strain this puts on wallets, Wall Street analysts are actually advising people to buy stocks in this sector.
A recent analysis by FactSet reveals that, out of all the industries tracked by the firm, analysts are most optimistic about the energy sector. In fact, a staggering 64% of ratings for this sector are “buy” recommendations. On the other hand, consumer staples have the lowest percentage of “buy” ratings, at just 45%.
Two major players in the oil industry, Schlumberger and Halliburton Co., emerge as favorites among analysts. Schlumberger receives an impressive 94% “buy” rating, while Halliburton stands at 93%. Other top-ranking companies according to analysts include Delta Air Lines Inc., Amazon.com Inc., and Nvidia Corp.
The rise in oil prices has not only impacted consumer spending but has also contributed to an overall price surge in recent months. While inflation rates have slowed compared to last year, the increased cost of essentials like oil, coupled with higher interest rates, has limited people’s purchasing power in other areas. This affects various businesses within the consumer discretionary sector such as stores, hotels, auto makers, and restaurants.
In fact, the October contract for West Texas Intermediate crude settled above $90 a barrel recently, marking the highest front-month price since November. The increase in oil prices can be attributed to reduced production from Saudi Arabia and Russia.
Despite the challenges it presents to consumers, the soaring oil and gas prices have captured the attention of Wall Street. With analysts recommending buying energy sector stocks, it seems that this industry holds great potential in the coming months.
Third-Quarter Earnings: Modest Growth Expected
With the third-quarter earnings reporting season just a few weeks away, Wall Street analysts are collectively anticipating a slight growth in profit for the 500 companies in the S&P 500 Index. According to FactSet, they predict a 0.2% increase in per-share profit during that quarter. However, estimates for the fourth quarter tend to trend lower as more quarterly results are released, with an expected earnings gain of 8.2%.
This Week in Earnings
During the week ahead, several companies are set to report their earnings. Online clothing-selection and styling service Stitch Fix Inc. (SFIX) will be reporting amid efforts to cut back. Auto-parts retailer Autozone Inc. (AZO) and homebuilder KB Home (KBH) will also be releasing their earnings, following rival Lennar Corp.’s positive report on the new homebuilding market. Additionally, workplace-furniture maker Steelcase Inc. (SCS) and Olive Garden parent Darden Restaurants Inc. (DRI) will be reporting. In total, five S&P 500 companies are scheduled to announce their earnings, as stated by FactSet.
The Standout Event
FedEx results, amid shipping-sector drama: On Wednesday, package deliverer FedEx Corp. (FDX) is set to report its quarterly earnings amid efforts to downsize operations and cut costs in response to weaker demand. However, these results will also follow a period of drama involving some of its competitors. According to TD Cowen analyst Helane Becker, FedEx “canceled flights during the quarter due to weak demand.” She also believes that the company may have benefited from labor issues at UPS and Yellow’s bankruptcy.
The Key Figure
The number to watch closely will be FedEx’s quarterly earnings report on Wednesday amidst the ongoing challenges within the shipping sector.
General Mills and Food Prices
General Mills Inc. reports results on Wednesday, providing valuable insights into consumer behavior in the grocery aisle. As the owner of popular baking brands such as Betty Crocker and Bisquick, as well as pet-food maker Blue Buffalo, General Mills plays a significant role in understanding how consumers are responding to recent price hikes in the food industry.
The results will shed light on the changing dynamics of consumer spending habits, particularly the growing trend of bargain hunting among shoppers. This behavior is evident not only among regular food shoppers but also within the pet-food market.
General Mills’ expertise in the industry positions them uniquely to provide valuable analysis on consumer behavior during these challenging times. By exploring the impact of price changes on purchasing decisions, the company’s report will help businesses and consumers alike navigate the evolving landscape of food prices.
Stay tuned for General Mills’ report to gain valuable insights into the current state of consumer behavior and its implications for the food industry as a whole.
