Revisions Galore for Energy and Industrials in the Wake of This Week’s Market Turmoil

World markets were in a panic again this week due to another sell-off in China on Monday which prompted energy prices to fall further and overall market sentiment to collapse. In the Estimize coverage universe, the companies that saw the largest revisions to Q3 estimates were not so surprisingly within the energy and industrials sectors. These are the 5 with the sharpest revisions in the past month.

Chevron (CVX)

Chevron is the second largest oil company in the United States and therefore has no doubt felt the pinch from declining oil prices, with Brent Crude Oil down more than 17% in the past month, and WTI falling 15%. In that time, the Estimize consensus for Chevron’s third quarter have fallen in lockstep. On August 11 the company was expected to earn $0.93/share, that has since fallen to $0.67, a decrease of 28%. Revenues on the other hand have increased, from $23.4B on August 11, to $25.2B as of today, still well below Wall Street’s estimate for $28B.

Flowserve Corp. (FLS)

Along with energy, the industrial names have been hit hard, too, as many within that sector rely on strength from the global economy, especially China. FlowServe, which manufactures and distributes industrial flow management equipment worldwide, has recently made substantial investment in emerging market operations, including China, India and Brazil. However, last quarter the company saw sales and bookings in Asia-Pacific fall by double-digit percentages, reflecting slowing growth in some of their major markets. Estimize has seen Q3 EPS estimates for FLS fall 12% in the last month. On July 28 EPS was expected to come in at $1.08, that is now down to $0.95. Revenues have fallen as well, from $13.2B to $12.2B.

Exxon Mobil (XOM)

The big kahuna, Exxon Mobil is the largest US oil company and the fourth largest in the world. Despite oil prices which began to collapse in the third quarter of 2014, the giant has been able to surpass earnings expectations every quarter, with the exception of the latest quarter, while still putting up an impressive beat on the sales front. Since July 31st expectations for earnings have dropped 11%, on that date they were $1.07, dropping to $1.00 by August 6, $0.96 by Aug 23, and to $0.95 on Monday where they have since stayed. Revenues on the other hand have increased, from $62.9B on July 31, to $65.4B as of today, still well below Wall Street’s estimate for $69.2B. Overall estimates for the entire S&P 500 energy sector have fallen, too, now expecting negative profits of 65% in Q3 vs. a Q2 final of -53%.

FedEx (FDX)

FedEx is another big industrial name that has been feeling the pain of a global slowdown. While the transports should be benefitting from lower fuel prices, decreased fuel surcharges and lower package weight, along with a decrease in international revenue per package due to currency headwinds has been weighing on the company. FedEx is also finding their higher end services waning in popularity, with more demand for ground services. Overall the Estimize community has pulled back 6% on EPS estimates, from a consensus for $2.62 a month ago to $2.47 today. Revenue estimates have bounced around, from a peak of $12.33B at the end of June, down to a low of $12.08B in the beginning of July, and inching upwards to $12.25B today.

Caterpillar (CAT)

Manufacturing giant Caterpillar gets a significant amount of its total revenues from China and is often used as a barometer for the strength of China’s economy. Last quarter the company saw profits fall 29% and revenues decrease almost 14% as a result of severe weakness in mining and lower construction related sales in China and Brazil. In response, Caterpillar cut its outlook for revenues by $1B, and is now expecting $49B in 2015. The company has also been reducing its workforce, eliminating close to 5,000 full-time and part-time positions in the past year. Earnings estimates on the Estimize platform are down 5% in the past month, falling from $1.07 at the end of July to $1.02 today. Revenues too, have decreased, from an expectation for $12.6B last month to $12.1B today.

Of course we are still about six weeks out from the peak of the Q3 earnings season, so these numbers will change further. Whether they will go back up or decline further remains to be seen.

Source: Revisions Galore for Energy and Industrials in the Wake of This Week’s Market Turmoil


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