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The first quarter of 2025 earnings season is underway, and investors have been closely watching the oil/energy sector amid continued macroeconomic uncertainty and commodity price volatility. Despite sector-wide challenges, a few energy companies appear well-positioned to post earnings surprises, potentially lifting their stock prices in the near-term.

Sector Snapshot: Mixed Signals From Commodity Markets

Oil prices weakened in first-quarter 2025, with West Texas Intermediate crude averaging $71.84 per barrel, down from $77.56 in the first quarter of 2024. The decline reflects soft global demand, rising inventories, and increased non-OPEC+ production. In contrast, U.S. natural gas prices rebounded sharply, averaging $4.15 per MMBtu versus $2.13 a year ago, thanks to colder weather and growing LNG exports.

Despite the recovery in gas prices, the energy sector remains under pressure. S&P 500 energy firms are expected to report a 12.9% year-over-year drop in earnings and a 0.3% dip in revenues, according to Zacks Earnings Trends. This is, however, a modest improvement from the 22.4% earnings decline seen in fourth-quarter 2024.

Still, we think these companies have what it takes to hold up well. Thanks to smart cost management, efficient operations, and a strong focus on natural gas, they could beat expectations this earnings season.

Sector Outlook: Weakness Persists, but Pockets of Strength Emerging

Despite improving natural gas prices, the energy sector continues to underperform on the earnings front. According to the latest data from Zacks Earnings Trends, first-quarter earnings for S&P 500 energy companies are expected to fall 12.9% year-over-year, while revenues are projected to slip 0.3%.

While this decline is milder than the 22.4% drop in fourth-quarter 2024, it still reflects significant pressure on profit margins. Oil-centric players, in particular, are struggling to maintain profitability amid weaker price realizations. Without the energy sector, the S&P 500 is expected to grow by 8.3%. This means that the energy sector is slowing down the overall market.

Yet, not all is bleak. With cost discipline, efficiency gains, and favorable exposure to natural gas or midstream operations, some energy firms are bucking the trend — and could deliver earnings surprises that drive upside in their share prices.

How to Identify Potential Outperformers?

With so many energy companies out there, it can be tough for investors to find stocks that are likely to beat earnings expectations. While it's impossible for common people to predict with 100% certainty, our unique method makes it easier.

Our research shows that for stocks with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold), the chance of a positive earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP is our special proprietary tool for spotting stocks most likely to outperform. It shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.

Our Choices

Even in this tough environment, some companies are showing signs of strength. One of those is Energy Transfer (ET - Free Report), a major player in the midstream space that operates pipelines and other critical infrastructure across North America.

Energy Transfer, with an Earnings ESP of +9.23% and a Zacks Rank #3 (Hold) rating, is scheduled to release first-quarter earnings on May 6. In terms of earnings surprises, Energy Transfer was in line with the Zacks Consensus Estimate in the past four quarters and fell short thrice, delivering an average negative surprise of 8.33%.

This is depicted in the chart below:

Energy Transfer LP Price and EPS Surprise

Image Source: Zacks Investment Research | Energy Transfer LP Quote

Another name worth watching is MPLX LP (MPLX - Free Report), a midstream partnership that focuses on fuel distribution, storage, and logistics. Like Energy Transfer, MPLX LP also has a +9.23% Earnings ESP and a Zacks Rank #3 (Hold) rating.

MPLX LP is set to release its first-quarter earnings on May 6. In terms of earnings surprises, MPLX LP surpassed the Zacks Consensus Estimate twice in the past four quarters and fell short twice, resulting in an average negative surprise of 3.63%.

This is depicted in the chart below:

MPLX LP Price and EPS Surprise

Image Source: Zacks Investment Research | MPLX LP Quote

Then there’s Pembina Pipeline (PBA - Free Report), a Canadian firm that’s been operating energy infrastructure for more than 70 years. Pembina Pipeline is scheduled to release earnings on May 8.

The company has an Earnings ESP of +2.93% and a Zacks Rank #3 (Hold) rating. In terms of earnings surprises, Pembina Pipeline has met the Zacks Consensus Estimate once in the past four quarters, missed it twice, and surpassed it once, resulting in an average negative surprise of 2.39%.

This is depicted in the chart below:

Pembina Pipeline Corp. Price and EPS Surprise

Image Source: Zacks Investment Research | Pembina Pipeline Corp. Quote

Lastly, ConocoPhillips (COP - Free Report) is another energy stock that could be in focus. As one of the largest exploration and production companies in the world, ConocoPhillips is heavily tied to oil prices, which, as we know, have been under pressure. Despite that, the company surpassed the Zacks Consensus Estimate once in the past four quarters and fell short thrice, resulting in an average surprise of 2.07%.

The company has an Earnings ESP of +2.76% and a Zacks Rank #3 (Hold) rating. ConocoPhillips is scheduled to release earnings on May 8. Given its global reach and efficiency-focused strategy, it’s possible the company could do better than expected, even in a weaker pricing environment.

This is depicted in the chart below:

ConocoPhillips Price and EPS Surprise

Image Source: Zacks Investment Research | ConocoPhillips Quote

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