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  • Earnings Are Up? Wait for Big Oils this week! 1 comment
    Jul 25, 2011 4:27 PM | about stocks: XOM, CVX, COP, BP

    The chatter on the street is that earnings season has been surprisingly strong this earnings season.   While it should be no surprise as most of the companies in the S&P and DJIA (the most commonly cited beats) are international companies.  These companies (in many cases) are worldwide and thus participate nicely in the global growth.  When foreign profits come back in US dollars the translation is very positive, plus they have the ability to raise prices to cover higher costs due to their overall size.

    However if you think earnings growth has been solid so far, wait until you see the earnings releases of XOM, COP, CVX, and BP this week.  Their year over year numbers should be solidly up from 25% to 50%.  Even more, their cash flows will enable plenty of flexibility regarding new share purchases, dividend increases, or new capital spending plans. 

    While the stock prices of these companies somewhat reflect the better earnings, all of them are trading at valuation levels that indicate that the earnings are "transitory".  While earnings might level off for a few quarters, we believe that the inflationary impact of the world's reserve banks will continue to provide a floor under any drop in oil prices.  Therefore we are believers in these large integrated names and believe that astute investors should make sure they are at least proportionately weighted in their portfolios. 

    Regardless of your investment stance on individual names, this week's reports will substantially boost overall earnings of the averages.  While everyone is focused on the crisis of the day (US debt ceiling), we may wake up next week to some bullish upgrades courtesy of BIG OIL.

    Stocks: XOM, CVX, COP, BP
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    Author’s reply » The oil earnings didn't disappoint... These companies are simply printing money in this environment.
    30 Jul 2011, 12:31 AM Reply Like
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