The energy sector took a breather this month after its blazing performance in 2022, but it’s making a comeback, with stocks including ConocoPhillips (NYSE: COP), EOG Resources, Inc. (NYSE: EOG), HF Sinclair Corporation (NYSE: DINO), and Phillips 66 (NYSE: PSX) boasting strong price action.

The S&P large-cap energy sector, tracked by the Energy Select Sector SPDR Fund (NYSEARCA: XLE), is up 3.44% in January and 6.76% on a one-month basis. It’s not the 2023 leader, lagging behind communications services, consumer discretionary, materials, real estate, and technology. 

Energy was the largest contributor to S&P earnings growth in 2023, which helped stem even more significant losses in the broader index last year. With the fourth-quarter earnings season underway, investors can’t say 2022 is completely in the rearview mirror, as upcoming reports will indicate strengths, weaknesses, opportunities, and threats facing the sector as macroeconomic factors continue to shift. 

According to researcher FactSet, the forward price-to-earnings ratio for the sector is the lowest within the S&P 500, at 10.5. 

The sector is trending higher, with several large- and midcaps showing a good combination of fundamental and technical strength that could lead to breakouts in the coming weeks. 

ConocoPhillips

ConocoPhillips’ chart shows an uptrend with higher highs and higher lows as the stock works its way upward, holding above its December 18 structure low of $109.01. That’s illustrative of the pattern many large-cap energy stocks are forming. ConocoPhillips’ January gain of  3.22% lags behind the sector’s gain. Still, its fourth-quarter earnings report, due on February 2 before the market opens, may provide a catalyst and offer more information about the company’s outlook for the first half of this year.

Analysts expect the company to earn  $2.81 per share on revenue of $18.02 billion, which would be year-over-year increases on the top and bottom lines. 

EOG Resources

Fellow S&P component EOG Resources is also etching the right side of a consolidation that had a sharp downturn the week ended December 9. 

The company is due to report fourth-quarter and 2022 results on February 24, ahead of the opening. Wall Street is earnings of $3.46 on revenue of $7.17 billion. MarketBeat earnings data for EOG show a checkered history regarding meeting net income and revenue expectations. 

Analysts expect the company to clock in with 2022 full-year earnings of $14.08 per share, a 64% increase over 2021. That estimate was revised lower recently as energy companies, along with other sectors, decreased their fourth-quarter guidance.

HF Sinclair

HF Sinclair Corporation, whose DINO ticker evokes the company’s well-known dinosaur logo, has a market capitalization of $12.52 billion and is not part of the S&P 500. It is, however, tracked in the S&P Midcap 400 index. Last year, the company was formed when HollyFrontier and Holly Energy Partners, L.P. (NYSE: HEP) established HF Sinclair as the new parent holding company of HollyFrontier and HEP.

As part of that deal, Holly Frontier acquired Sinclair Oil Corporation, and Holly Energy Partners acquired Sinclair Transportation Company. HF Sinclair replaced HollyFrontier as the public company trading on the New York Stock Exchange.

Sinclair’s chart reflects a sharp uptrend since January 17, with the stock gapping higher at the open on January 23. Analyst ratings alone are not likely to be driving the uptrend, which came in trading volume heavier than in prior weeks but still below the 50-day average. Since the start of January, two analysts boosted their ratings or price targets, while two lowered their targets.

The company is slated to report its fourth quarter on February 24 before the opening, with analysts forecasting earnings of $3.59 per share on revenue of $7.89 billion. Both would be increases over the year-ago quarter. 

Sinclair has easily beaten earnings and sales estimates in the past three quarters, as earnings data compiled by MarketBeat show. 

Phillips 66

Phillips 66 is among companies whose earnings estimates have been revised higher lately, bucking the wider trend of doward revisions, according to FactSet. 

Analysts see the company earning $19.37 per share for 2022, a 240% increase. Phillips 66 reports fourth-quarter and full-year results on January 31 ahead of the open, with analysts eyeing earnings of $4.38 a share on revenue of $36.85 billion. 

Phillips 66’s chart shows a gradual and somewhat choppy uptrend since the stock’s December 9 low of $97.94. 

Unlike other oil-and-gas stocks that rallied to all-time highs in 2022, Phillips 66 is only trading at  January 2020 levels, meaning it still hasn’t made up the declines from the initial pandemic-driven downturn. That suggests Phillips 66 may be undervalued relative to its earnings potential and the rest of its industry. 

The stock has a P/E ratio of 6, lower than the sector average, and a dividend yield of 3.58%, which could make this an attractive watchlist candidate as it climbs out of its correction.