Welcome to another Friday earnings edition of What My System Says Today!
Before I jump into “bullish” and “bearish” earnings this week, I want to share some interesting research I found this week.
It relates to the earnings potential for both the energy and utilities sectors of the market.
Interestingly, one is on the rise, while the other … isn’t.
Let’s start with energy.
From October 2020 to July 2021, the SPDR Energy Sector ETF (XLE) rose 105.5% on the back of higher crude oil prices.
Well, what is given can also be taken away.
A 15% drop in the average price of oil from 2024 to 2025 means we should expect tough earnings for the energy sector this quarter.
According to data firm FactSet, the energy sector is poised to experience the most significant year-over-year earnings decline of all 11 sectors in the S&P 500.
Overall, the sector is projected to experience a 4.2% decline in earnings, driven by decreases in subsectors such as oil & gas exploration and production, integrated oil & gas, and oil & gas equipment and services.
A bright spot is that subsectors like oil & gas refining and marketing, as well as oil & gas storage and transportation, are projected to have earnings increases of 53% and 24%, respectively.
Another silver lining is that analysts expect year-over-year energy sector earnings to turn positive by the first quarter of 2026 and continue to grow throughout the latter part of the year.
On the other hand, you have the utilities sector.
The SPDR Utilities Sector ETF (XLU) is up from its April 2020 low, but only by 57%. Compare that with the SPDR Technology Sector ETF (XLK), which has risen 127% over the same period.
However, unlike the energy sector, utilities are expected to beat the pants off their year-over-year earnings this quarter.
Analysts are projecting earnings growth in the sector of 17.1% — the second-highest of all 11 S&P 500 sectors.
Furthermore, growth is expected to continue into the third quarter of 2026.
The largest contributors to this quarter’s earnings growth are independent power & renewable electricity producers. However, all five utility categories are expected to increase earnings by at least 9%.
Much of this is due to the increased demand for power by data centers across the country. Through September, power demand in the U.S. increased 2.3% year-over-year — primarily in Virginia and Texas.
Pro tip: Check out my most recent piece on data centers here.
For now, it appears to be a promising road ahead for utilities, but a bumpy one for the energy sector.
Now, let’s get into “bullish” earnings potentials for next week…
“Bullish” Earnings to Watch
These stocks are expected to beat their previous quarter’s earnings per share (EPS), and thus, if those expectations are met or exceeded, they could potentially trade higher.
For this screen, stocks must meet four criteria:
- 10 or more analysts cover the stock.
- The average analyst recommendation is a “Buy.”
- It BEAT analysts’ EPS estimates for the previous quarter.
- The average analyst estimate for the current quarter’s EPS is greater than the previous one.
Here are 10 companies that made this week’s list:
One thing to note is that of these 10 stocks, all but three have a “High-Risk” or “Bearish” rating on Adam’s Green Zone Power Rating system.
A beat on earnings, revenue, or both could go a long way to elevate any one of those seven to a different category.
However, today I would like to focus on Lockheed Martin Corporation (LMT).
The U.S. defense contractor has had several highlights over the last quarter, including:
- Delivering its first F-35 fighter to the Belgian Air Force.
- Working with Sikorsky to convert the UH-60L Black Hawk helicopter into the autonomous S-70 UAS, complete with more cargo space and a new fly-by-wire system.
- Completed successful soldier-led test flight of the Precision Strike Missile (PrSM).
Couple all of that with the contract award to build up to 99 CH-53K heavy-lift helicopters for the U.S. Marine Corp., and you have a pretty good quarter for Lockheed Martin.
I see LMT exceeding analysts’ expectations in terms of quarterly revenue and making strides to move out of the “Bearish” zone on Adam’s Green Zone Power Rating system.
Now, let’s move on to potential “bearish” earnings next week…
“Bearish” Earnings to Watch
For our “bearish” earnings screen, we’re only looking for two things:
- 10 or more analysts must cover the stock.
- The average analyst estimate for the current quarter’s EPS is less than the previous quarter’s.
We want companies that are covered by a sufficiently large group of Wall Street analysts who collectively expect the company to report a quarter-over-quarter decline in earnings.
Here are 10 companies that passed this screen:
The interesting name on this list is Northrup Grumman Corp. (NOC).
Like Lockheed Martin, Northrup is a large U.S. defense contractor. It’s currently in the mix to build the U.S. Navy’s next-gen stealth fighter, along with helping produce more missiles for the government.
It recently delivered the first Airborne Laser Mine Detection System pod to the Republic of Korea and developed a new 25 millimeter grenade launcher for the U.S. Army.
While it’s likely Northrup Grumman will not meet the earnings level it had last quarter, I think it will beat expectations this quarter.
That could help boost, not only NOC’s stock momentum, but also its already “Bullish” rating on Adam’s system.
Definitely things to keep an eye on next week.
I hope you all have a great weekend.
Safe trading,
Matt Clark, CMSA®
Chief Research Analyst, Money & Markets