2 Energy Stocks That Could Stall Out Next Quarter

COP and XOM have been two of the worst SPX stocks in the second quarter, going back a decade

by Patrick Martin

Published on Mar 29, 2018 at 12:12 PM

It's been a rough three months for energy stocks, with the Energy Select Sector SPDR Fund (XLE) pacing for a first-quarter loss of more than 7%. This negative price action was in full view Wednesday, with several names in the sector finishing lower after the Energy Information Administration (EIA) reported a bigger-than-expected rise in crude inventories last week. If past is precedent, oil names ConocoPhillips (NYSE:COP) and Exxon Mobil (NYSE:XOM) could be headed for even bigger trouble in the second quarter.

ConocoPhillips Stock Could Be at Risk of Downgrades

Per data from Schaeffer's Senior Quantitative Analyst Rocky White, COP stock has been one of the worst stocks to own on the S&P 500 Index (SPX) in the second quarter, looking back 10 years. Specifically, COP shares have ended the quarter higher only 40% of the time, averaging a monthly loss of 3.23%.

At last check, ConocoPhillips stock was up 1.1% to trade at $59.36, after Citigroup issued a price-target hike to $70 from $63. After scoring a two-year high of $61.31 on Jan. 24, COP shares pulled back to their 120-day moving average. The stock consolidated there for about a month, before climbing back toward the $60 level. 

Analysts remain optimistic, with 13 of the 15 brokerages covering COP rating it a "buy" or "strong buy," and not a single "sell" to be found. Furthermore, the stock's average 12-month price target of $66.43 is a 12% premium from the stock's current perch. Should the energy shares stall out in the coming months, it could cause analysts to rethink their bullish outlooks. 

Exxon Mobil Stock Could Keep Sinking 

Exxon Mobil stock is up 2.4% to trade at $74.54, despite receiving a price-target cut from Citigroup to $73 from $81. It's been a painful year for XOM stock, down 16.5% from its Jan. 29 annual high of $89.30. More recently, the stock gapped lower after the oil major's analyst day, and hit a two-year low of $72.67 last Friday. 

According to White, XOM stock is also among the worst to own in the second quarter, historically speaking. The equity has finished the quarter higher just 40% of the time over the past 10 years, averaging a loss of 1.30%. 

Nevertheless, options traders have displayed a healthier-than-usual appetite for long calls over puts lately. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows XOM with a 10-day call/put volume ratio of 3.15, which ranks in the elevated 83rd percentile of its annual range.


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