Energy Sector Earnings Underwhelm Amid Lower Oil Prices

The energy sector is expected to post the lowest profit growth at -24% Y/Y due to lower oil prices. Four of the five sub-industries in the sector are reporting a year-over-year decline in earnings, with Integrated Oil & Gas experiencing a -34% decline. Exxon Mobil and Chevron are scheduled to report earnings on Friday, with consensus EPS forecasts at $1.49 and $1.66, respectively, down from last year's comparable quarters.

The energy sector is facing a challenging earnings season, with the sector expected to post the lowest profit growth at -24% year-over-year (Y/Y) due to persistently lower oil prices. According to FactSet, the pivotal energy sector is anticipated to deliver lackluster earnings, with four of the five sub-industries reporting a year-over-year decline in earnings. Integrated Oil & Gas is particularly hard hit, with a -34% decline in earnings [2].

The primary culprit behind this earnings decline is the significant drop in oil prices. In the second quarter of 2025, oil prices averaged $63.68 per barrel, a 21% decrease from the second quarter of 2024 ($80.66). This decline is attributed to heightened U.S.-China trade tensions, elevated fuel inventories, and softer demand projections [2].

Key players in the sector, such as Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX), are scheduled to report earnings on Friday, August 1. The consensus earnings per share (EPS) forecast for Exxon Mobil is $1.49, a sharp fall from $2.14 posted for the same quarter last year. Chevron is expected to report Q2 2025 EPS of $1.66, down from $2.55 for Q2 2024 [2].

While the broader S&P 500 is expected to deliver 5.7% earnings growth in the second quarter, the energy sector remains a significant drag. Excluding energy, the index’s earnings growth improves to 7.8%, highlighting the sector’s negative impact [1].

In contrast, the natural gas sector has been a bright spot, with prices surging due to strong demand from colder weather, increased power usage, and robust LNG exports. Natural gas prices averaged $3.19 per million British thermal units (MMBtu) in the second quarter of 2025, up more than 50% from the same period last year [1].

Despite the sector-wide challenges, some companies within the energy sector have reported robust earnings. Enphase Energy (NASDAQ:ENPH), a solar and home energy solutions provider, reported a 19.7% Y/Y increase in revenue and a 19.7% Y/Y increase in non-GAAP EPS. Similarly, GE Vernova (NYSE:GEV), a renewable energy company, reported a 11.0% Y/Y increase in revenue and a 10.0% Y/Y increase in GAAP EPS [2].

The energy sector's earnings performance is a stark reminder of the challenges posed by lower oil prices and the sector's reliance on oil as a primary output. Investors and financial professionals should closely monitor the earnings reports of key players in the sector and assess the potential impact on the broader energy market.

References:
[1] https://au.finance.yahoo.com/news/watch-4-energy-stocks-q2-140200367.html
[2] https://oilprice.com/Energy/Energy-General/Energy-Sector-Drags-as-Oil-Prices-Weigh-on-Profits.html