Railroaders place to shoot the shit.

Holy shit! Oil prices per barrel just hit a record at $60.30 per barrel! But prices at the pump haven't shown much upward movement.

At the end of the year, that's the biggest surprise of all!

The latest: Uke owns five of the stocks listed in a Roth IRA, and a regular stock account.

You don't hafta be rich to own stocks. Just open an account, then buy a few shares of a stock you know about.

r

By

Philipvan Doorn

Investing columnist

 

Oil companies, buoyed by the rising price of crude oil, are set for major profit recoveries over the next two years, which means patient investors could finally make money again in the once-beleaguered sector.

The stalling of the oil rally last year sent energy stocks reeling, but what many investors may not realize is that most of the biggest energy companies swung to profits.

Looking ahead, we have put together a list of those expected by analysts to show double-digit increases in earnings for 2018 and 2019.

This chart tells the 2017 tale of woe for investors who were looking to make a quick gain on the rising tide of oil:

FactSet

If we confine ourselves to 2017, the market showed no faith in oil companies, even though West Texas intermediate crude oil CL1, +0.50%  (WTI) eventually rallied to produce a 12.5% gain for the year. Despite that significant increase for the commodity on which its success is based, the S&P 500 energy sector was down 3.9%, while the broader S&P 500 Index SPX, +0.13%  rose 19.4%.

Of 32 companies in the S&P 500 energy sector, 24 posted negative earnings per share for 2016, while one company broke even and only seven booked profits. With three quarters of 2017 earnings data available, analysts polled by FactSet expect 19 of the 25 companies that were unprofitable in 2016 to post for all of 2017.

So theres plenty of good news. The average price of WTI during 2017 was $50.80, and 26 of the 32 S&P 500 energy companies are expected to show profits for the year.

With WTI trading around $62, it may come as a surprise to see that the mean 2018 price target for analysts is $57.40, while the 2019 target is $59.87. Then again, analysts have a way of trailing a volatile market. But even with those price estimates, analysts expect vast improvements in earnings for the industry in 2018 and 2019.

So analysts expect a steady recovery in earnings, even if oil prices dont rise over the next two years. And investors have become more enthusiastic. The S&P 500 energy sector is up 4.5% for 2018 through Jan. 8, second only to the information-technology sector, which is up 4.6%. The broader index is up 2.8%.

For profitable oil companies, price-to-earnings ratios are still high, because industry earnings have been depressed. So if you expect oil prices to remain stable, or to go up over the next few years, your best way to play the rising tide may be to consider stocks of companies that are expected to show the largest increases in earnings.

Here are all 32 S&P 500 energy companies, with estimated EPS for 2017, 2018 and 2019, sorted by how much analysts expect their 2018 EPS to increase:

You can click the tickers for price ratios, as well as news coverage, financials and filings. Were only looking at one data point here earnings growth so its best to do your own research and consider a companys condition and strategy to form your own opinion about whether its worth a long-term commitment as an investment.