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Earnings Preview: Crude Oil and Transocean Rally Ahead of Quarterly Results

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Analysts have been lowering estimates for Transocean despite a 9% rally since April 8, but major earnings per share growth is still expected.

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The bulls are still in the drivers seat on Wall Street as stimulus hopes on both sides of the Atlantic Ocean are keeping confidence levels elevated despite lackluster fundamental data. The latest monthly employment report at home managed to beat expectations, and the data revealed that the labor market recovery is still sluggish at best; nonetheless, stocks are still charging higher as investors have embraced the latest round of interest rate cuts from the European Central Bank and the Reserve Bank of Australia.

Earnings season is still underway on Wall Street, although corporate performance results have certainly taken a backseat over the last week as more pressing economic news have stolen the headlines. Oil-drilling giant Transocean (NYSE:RIG) will bring back the spotlight to the commodity front later today as the company reports its quarterly results after the closing bell.
  • Transocean: Analysts have been lowering their expectations for RIG over the last month despite the fact that shares have rallied nearly 9% since April 8. Nonetheless, analysts are expecting for a nearly 50% improvement in earnings-per-share from the year-ago quarter; RIG is expected to post a profit of $1 per share compared to last year's quarterly results of 68 cents per share.
Amid all of the excitement on Wall Street with the S&P 500 Index (INDEXSP:.INX) soaring past the closely watched 1,600 level, crude oil prices have taken part in the rally over the last month, which has helped the commodity recoup a lot of the losses it accumulated last month; year-to-date, crude oil prices have gained roughly 4%, while much of that is owed to the impressive 10% return seen over the last few weeks since prices bottomed out in mid-April.

With U.S. industrial data coming in just barely above expectations over the last few months, it's difficult to pinpoint the fundamental price driver behind crude's rally. Perhaps investors are confident that the ongoing Fed bond-repurchase program and recent rate cuts in Australia and the eurozone will stimulate economic growth, thereby driving up the demand for energy across the board.

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Editor's note: This article by Stoyan Bojinov was originally published on Commodity HQ.
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