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April 11, 2007

Don't Play the earnings game with the oils this season!

The oils

The wait is over, earnings season is back. Alcoa (AA)kicked the season off with some stellar numbers beating earnings by 3 cents. Net income was up 9% in the first quarter. Alcoa was up 0.09% in Tuesday's session, and recently up 1.4% afterhours. Although the season started off with the right foot its not an indication that Wall Street will post the record breaking quarters it it has been posting in the last year.

The streak of record breaking quarters began two years ago when oil prices just started skyrockets. Oil companies were BANKING! They were crushing earnings estimates and increasing their earnings porjections for the next quarter (or five!!!). Thse sort of numbers will be hard to repeat even with oil trading close to its historical highs. one reason I would also be hesitant ot be holding the big oils during the earnings season is because of the issues going on in venezuela with Chavez trying to nationalize its industries. An analyst will certanly ask a question along these lines and it will be incredibly hard for executives to answer this question just because of the uncertanty surounding the issue.

Dont get me wrong, oil is a great play long term but for the next few weeks, its just too risky for me. If you're holding the big oils I would sell and the drillers I would hold. I would be buying all international for this earnings season. I would be looking at RIO, WIR and maybe GSH.

Below is a link to oil and other commodity prices
Oil and other commodities.

Copyright © Eric Medina

Posted by eamed at April 11, 2007 02:16 AM


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