Just over a year ago, oil was hovering around $110 per barrel. Now it’s struggling to cross $50. In between, it sunk to a 6½-year low of $38 a barrel.

All’s Not Well with Oil

As is now widely recognized, the main culprit behind the plunge is a classic case of supply-demand mismatch. Surplus production remains an issue, particularly with the boom in American shale output. At the same time, weak global consumption is set to continue in the short- to medium term, thanks to Japan, Europe and now China. Finally, a strengthening dollar is holding back ‘black gold’ prices.

As a result, energy stocks have been dead money this year, brutalized by the slide in oil. Most stocks have slipped big time – 30% or more – as the commodity has collapsed and industry profit margins have sagged.

Q3: It’s Still Wrecking Havoc

Third-quarter 2015 was more or less a repeat of the first two quarters: continuing oil price weakness. West Texas Intermediate (WTI) crude futures during the Jul–Sep 2015 period hovered mostly between $45 and $55 per barrel. In fact, the commodity tallied a loss of 24% for the quarter. Well into the final 3 months of the year, crude price is still low with no sign of a recovery on the horizon.

Some Companies Stood Tall Amid the Carnage

Going by the past year’s track record of oil prices, the term ‘energy stock’ probably conjures an image of sharp fall in share prices and investment dollars going down the drain. However, that isn’t necessarily the case – there are a number of companies that have soundly beaten our third quarter earnings estimates. Looking at our Earnings Trends report, things become clearer.

For the 65% industry components that have come out with their numbers – comprising 85.5% of the sector market capitalization – 76.9% beat EPS estimates. Being the most studied number in a company’s financial statement, earnings outperformance – a significant one at that – generally tends to lift share prices.