2 Energy Mid-Caps Expected To Post Monster Earnings Growth

Key Points

• The energy sector as a whole has shown renewed signs of life lately. 
• Switzerland-based Weatherford International has posted big price gains since its June 2021 debut; its year-to-date return is 16.77%.
• Analysts expect the company to grow earnings by 441% this year.
• Marine operations specialist Tidewater is seeing revenue growth due to a recent acquisition and higher day rates.
• Tidewater is expected to post earnings growth of more than 1,100%. 

The energy sector, as tracked by the Energy Select SPDR Fund NYSEARCA: XLE is a perfect demonstration of “worst to first” on a year-to-date basis, with a 2023 decline of 8.36%, following its 2022 increase of 64.17%,

But as any seasoned investor or trader knows, sector rotation can sneak up on you, and asset classes given up for dead can return to life. There may be some signs of a revival in the energy sector. 

Weatherford International plc NASDAQ: WFRD and Tidewater Inc. NYSE: TDW are two smaller energy stocks expected to post monster earnings growth this year. 

In the past week, as oil and natural gas prices rose, some of the biggest energy industry stocks also moved higher, pulling the sector up by 4.13% in the past five days. Acquisition news from  Oneok Inc. NYSE: OKE and Chevron Corp. NYSE: CVX helped buoy investor spirits. 

Although energy behemoths Chevron and Exxon Mobil Corp. NYSE: XOM have the most power to drive sector performance, smaller industry stocks are thriving for their reasons. 

Here’s a look at investor optimism about Weatherford and Tidewater.

Weatherford International

Switzerland-based Weatherford provides equipment and services to the oil-and-gas industry worldwide. It offers a wide range of products and solutions, including drilling services, well construction, completion systems, artificial lift systems, reservoir evaluation, and production optimization. One of its goals is to help oil-and-gas operators maximize their operational efficiency and production. 

The stock is newly public, having made its debut in June 2021, so it’s in that zone where young companies often post big price gains. Year-to-date, Weatherford is up 16.77%. As you can see on the Weatherford International chart, the stock had a big run-up beginning in August 2022, topping out near $70 in March of this year.

In April, the stock tried to break out of a cup-with-handle pattern, but pulled back into a correction. It’s normal to see some selling after a fast rally that delivered big price gains, and as the stock takes a breather, investors can watch for it to surpass levels near $66.52 as a possible buy point.

Weatherford International earnings show the company beat net income and revenue views in the most recent quarter. Wall Street expects strong growth from here, with the company increasing net income by 441% this year to $4.66 a share.

There’s a consensus view of “buy” on the stock, according to Weatherford International analyst ratings. An increase in international drilling activity is among the factors analysts see driving Weatherford’s growth.

 Tidewater

Houston-based Tidewater is part of the oilfield services sub-industry, which includes large caps Schlumberger Ltd. NYSE: SLB and Halliburton Co. NYSE: HAL. Both those stocks have garnered favorable ratings from analysts, and their stocks are up in the past week. That’s a good sign for a smaller company like Tidewater, as it’s generally a broad indicator of strength when numerous stocks in an industry are growing earnings and rallying. 

Tidewater provides offshore marine support and transportation services. Its fleet of vessels serves various offshore industries including exploration, development, production, and decommissioning of offshore oil and gas fields. Tidewater's vessels are used for towing, anchor handling, platform supply, crew transportation, and seismic support in both shallow and deepwater environments.

The stock has been forming a consolidation since March; as of March 24, Tidewater stock was about 5.5% below its potential buy point near $51.88. Shares were up 8.77% for the week in heavy trading volume. 

One caveat about the Tidewater chart: Because the stock has formed and broken out of several bases in the past two years without undercutting prior lows, a reset may be in order. In other words, if Tidewater stock pulls below previous structure lows, that may attract more investors who are seeking a lower valuation. Its price-to-earnings ratio is 75, which may be a bit frothy for some investors. 

Tidewater analyst ratings show a consensus view of “buy” on the stock. 

Wall Street expects Tidewater to report full-year earnings of $2.72 a share, an increase of more than 1,100% over 2022. 

In the company’s recent earnings conference call, CEO Quintin Keene said an increase in day rates, along with a recent acquisition, helped boost revenue. Revenue grew between 78% and 108% in the past four quarters.