Big oil earnings this week may confirm the ‘tide is finally turning’ for energy

Energy giants Chevron and Exxon are scheduled to report earnings Friday, and some are watching for whether the reports will reflect a turnaround in sight for the beaten-down energy sector.

"Energy has been an earnings laggard over the course of the last several years, but the tide is finally turning for the sector as it's now the biggest contributor to earnings growth," Mark Tepper, president and CEO of Strategic Wealth Partners, said Wednesday on CNBC's "Trading Nation."

The energy sector has badly underperformed the broader market this year, down 10 percent in 2017 making it the second-worst performing sector.

"Fortunately, as the tide has been turning, we've seen a significant rise in the price of oil since last quarter," Tepper said.

Indeed, crude prices have made a bit of a comeback, though the energy sector has not appeared to bounce back in sympathy.

"Because the price of oil started so low in [the third quarter] and gradually increased throughout the quarter, we're really not expecting to see that flow through to earnings this quarter. It will likely be next quarter," Tepper said, adding that he is looking for positive momentum across earnings reports to confirm the equities are moving "in the right direction."

Furthermore, he would recommend an overweight position in energy.

"We do feel the tide has certainly turned, and overall, the landscape for the energy sector in general looks to be positive. So we're looking at these earnings reports for Exxon and Chevron to really confirm that optimism," he said.

The two companies are the top-weighted holdings in the XLE, a popular energy-tracking exchange-traded fund, comprising more than 41 percent of the overall fund. Both stocks fell Wednesday.

Disclosure: Mark Tepper's firm owns Chevron.

Videos

Trades to Watch

Trader Bios

About

Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

Read more

Connect