The oil price outlook is good for energy companies because it is depressed, averaging a long-term low for Q4 and at an extreme level likely to increase as the year progresses. This means the outlook for energy company earnings is likely too low and that an outperformance/upgrade cycle is about to unfold. Based on the consensus figures for energy sector earnings, the rebound in sentiment and stock prices could be vigorous.
The early-January consensus of 3.5% is down 650 basis points from the peak in mid-2024, making the Energy Sector (NYSEARCA: XLE) the weakest regarding 2025 earnings growth and the most downgraded sector in the S&P 500.
