The Evolving Earnings Picture Amid Elevated Oil Prices

Uncertainty about oil prices due to the ongoing war is weighing on the market at present. But the associated spike in oil prices has done wonders for the Energy sector's earnings outlook.

The sector no longer enjoys the heft it once enjoyed in broad market indexes like the S&P 500 index – the sector accounted for 4.5% of all S&P 500 earnings in 2025, down from 13% in 2011 – but the steadily improving profitability outlook for the Energy sector is nevertheless adding to the overall favorable aggregate revisions trend.

The Zacks Energy sector is currently expected to enjoy +0.9% earnings growth in 2026 Q1, a material improvement from the -1.9% decline that was expected in early January. For full-year 2026, the expectation today is for +10% earnings growth, up from +5.4% earnings growth expected in early January.

We all intuitively understand that persistently high oil prices are not good for the U.S. economy, as high prices for gasoline, diesel, and other refined petroleum products end up acting as a tax on households. The U.S. economy is primarily consumption-driven, so high oil prices will eventually weigh on consumer spending. Offsetting this equation is the reality that the U.S. is also a major oil producer, one of the largest in the world, and does not need any imported oil.

What I am trying to explain here is that rising oil prices are undoubtedly negative for the U.S. in the financial analysis, as the benefit from improved profitability of the country’s energy-producing assets is offset by reduced consumer spending. But high oil prices are not as negative as they are in many other developed and developing economies that lack domestic oil production. For example, Japan, South Korea, and even Germany and France are entirely dependent on imported oil, and the hit to those economies from high oil prices is significantly more pronounced.

Oil prices in the futures market suggest that market participants don’t expect current supply disruptions to persist beyond the next few weeks. Oil prices will not immediately return to where they were before the start of the conflict, but that is where they will be heading over time once the conflict ends.

The chart below shows the sector’s earnings picture on a quarterly basis, with aggregate earnings estimates for 2026 Q1 and the following three quarters and actual earnings in the preceding 12 quarters (3 years).

Image Source: Zacks Investment Research

The chart below shows the aggregate earnings picture for the Zacks Energy sector on an annual basis.

Image Source: Zacks Investment Research

The Earnings Big Picture

For 2026 Q1 as a whole, total S&P 500 earnings are expected to increase by +13% from the same period last year on +8.9% higher revenues.

The chart below shows the Q1 earnings and revenue growth expectations in the context of where growth has been in the preceding five quarters and what is expected in the coming three quarters.

Image Source: Zacks Investment Research

Estimates for the current period (2026 Q1) have largely been stable, with a steady uptick in recent weeks, as the chart below shows.

Image Source: Zacks Investment Research

We noted earlier how estimates for the Energy sector have benefited from the ongoing Iran war. But the positive revision trend reflected in the above chart isn’t solely or even mostly due to the Energy sector. Q1 earnings estimates have increased for 7 of the 16 Zacks sectors since the start of January 2026, including Tech, Construction, Basic Materials, and Energy.

The jump in Energy sector estimates has been the most pronounced since the start of the Iran conflict, but estimates have actually risen for half of the 16 Zacks sectors.

The chart below shows the overall earnings picture on a calendar-year basis, with double-digit earnings growth expected in 2026 (and the next two years).

Image Source: Zacks Investment Research

A quick comment on ongoing market volatility in response to developments in the Middle East. Please keep in mind that for these almost upbeat earnings expectations to come true, we need energy markets to stabilize. As noted earlier, an extended period of spiking oil prices has material negative implications for households as well as businesses.

2026 Q1 Earnings Season Scorecard

The 2026 Q1 earnings season will really get underway when JPMorgan, Citigroup, and Wells Fargo come out with their March-quarter results on April 14^th. But the reporting cycle has already begun, with 14 S&P 500 members reporting results in recent days for their fiscal quarters ending in February. All of these companies with fiscal quarters ending in February, including bellwethers like Oracle ORCL, Micron Technology MU, and FedEx FDX, are included in our March-quarter tally.

Total earnings for these 14 index members that have reported results already are up +89.9% from the same period last year on +18.1% higher revenues, with 71.4% beating EPS estimates and 78.6% beating revenue estimates.

The comparison charts below compare the growth rates of the companies that have reported with what we have seen from this same group of companies in other recent periods.

Image Source: Zacks Investment Research

The comparison charts below put the Q1 EPS and revenue beats percentages for this group of companies relative to what we had seen from them in other recent periods.

Image Source: Zacks Investment Research

For a detailed look at the overall earnings picture, including expectations for the coming periods, please check out our weekly Earnings Trends report >>>> Earnings Outlook Improving Despite Iran War

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This article originally published on Zacks Investment Research (zacks.com).

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