Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Earnings Disappointment Sinks Energy Stocks

Mr. Market woke up on the wrong side of the bed this morning, and everything from stocks to oil is taking the brunt of the bad mood. U.S. economic growth of 2.8% in the third quarter was better than 2.5% the quarter before and came in 0.5% ahead of expectations. But a jump in inventory helped drive growth, and consumer spending was only up 1.5% in the quarter. That wasn't enough to impress investors, and as a result the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is down  0.85% late in trading.  

In energy, growth stocks are having trouble finding any traction today. WPX Energy's (NYSE: WPX  ) natural-gas production was down 6% from a year ago, but oil production was up 25%, highlighted by a 46% increased in production in the Williston Basin. Growth wasn't enough to overshadow a $114 million, or $0.57 per share, loss in the quarter -- nearly double last year's loss -- and shares are down 15.5% today.  

Like many other energy companies, WPX Energy is trying to make a transition to liquid-rich plays like the Williston Basin, but it's a painful transition right now, and investors aren't buying into the company's potential right now.

SolarCity (NASDAQ: SCTY  ) is another growing energy company, but it can't catch a break from investors today. Installations hit a record of 78 megawatts in the quarter, and residential installations grew 151% from a year ago to 60 MW. What investors are focusing on today is a $0.43-per-share loss in the quarter and expectations of a $0.55 to $0.65 loss per share next quarter, which is larger than expected.  

Again, growth is solid but not exactly what investors were expecting, causing a big pullback in the stock. What's important to keep in mind with growth stocks is the long-term trajectory companies are taking. WPX Energy is doubling drilling in the Gallup Sandstone play next year, and production from the Piceance Basin will pick up as well. That will return the company to solid growth and potentially a profit next year.

At SolarCity, the company is laying the foundation for decades of consistent returns, driven by more high-margin installations. That will drive shareholder value for years to come.

For both companies, the short-term reaction may be violent to the downside, but an eye on the end goal is key. WPX Energy and SolarCity are taking steps in the right direction in attractive markets. That's more important than Mr. Market's reaction on a bad day.

How to buy into the growing energy industry
The energy industry in the U.S. is booming and investors positioned well will make out like bandits. That's why The Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. Find out which three companies are spreading their wings in the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2717643, ~/Articles/ArticleHandler.aspx, 9/28/2016 5:05:39 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 7 hours ago Sponsored by:
DOW 18,228.30 133.47 0.74%
S&P 500 2,159.93 13.83 0.64%
NASD 5,305.71 48.22 0.92%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/27/2016 4:45 PM
^DJI $18228.30 Up +133.47 +0.74%
SCTY $19.99 Up +0.01 +0.05%
SolarCity CAPS Rating: ***
WPX $11.56 Down -0.27 -2.28%
WPX Energy CAPS Rating: ***