Renewable Energy Outshining Big Oil in 2013

Two of the Dow Jones Industrial Average's biggest components have become two of the biggest laggards so far in 2013. ExxonMobil and Chevron are dominant players in oil and have been great investments for a long time but this year they're being overshadowed by smaller renewable energy companies that are beginning to take share in the energy industry.

Recent earnings from ExxonMobil and Chevron show the challenges they're facing. Yesterday, ExxonMobil said revenue fell 2.4% in the third quarter and net income was down 21.6%, primarily on lower refining earnings. A similar trend played out today for Chevron, which reported that revenue was up just 0.8% to $58.5 billion and net income was down 5.8% to $4.95 billion, or $2.57 per share. As a result, Chevron is the worst performer on the Dow Jones Industrial Average today, falling 1.9%, and you can see that performance has been weak for both stocks this year.

In contrast, both First Solar and SunPower have reported earnings in the past two days that have crushed everyone's expectations. First Solar earned $1.94 per share, demolishing the $1.18 estimate, and SunPower's $0.44 in earnings was well above the $0.29 estimate from Wall Street.


As renewable energy companies have grown and improved profits, their stocks have outperformed big oil by a wide margin, as you can see below.

FSLR Total Return Price Chart

FSLR Total Return Price data by YCharts.

Long term, the trends continue to be in the favor of renewable energy and against big oil. Solar projects in Chile, Hawaii, Germany, and elsewhere are competitive with the grid without subsidy, and costs are only coming down. New markets like Saudi Arabia, Africa, and China are just scratching the surface of their potential.

On the flip side, oil is becoming harder to find, forcing explorers to look in ultra-deepwater and shale deposits around the world. This increases the cost for oil, and as demand for gasoline has dropped in the U.S. and Europe there's become less appetite for passing those costs on through higher gas prices. Not only is big oil's top line not growing, it's getting pressure on the bottom line as well.

Big oil isn't going away overnight, but it may be time to start considering a little renewable energy exposure for your portfolio. Energy trends are certainly tilting in their favor.

It's time to adjust to a new energy paradigm
Not only is solar taking share, natural gas is as well. To help prepare you for the future of energy, The Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

The article Renewable Energy Outshining Big Oil in 2013 originally appeared on Fool.com.

Fool contributor Travis Hoium manages an account that owns shares of SunPower and personally owns shares and has the following options: long January 2015 $5 calls on SunPower, long January 2015 $7 calls on SunPower, long January 2015 $15 calls on SunPower, long January 2015 $25 calls on SunPower, and long January 2015 $40 calls on SunPower. The Motley Fool recommends Chevron. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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John Simons

Renewable energy might be the reason for why the big names are posting earning declines. For the 1QFY13 Exxon, BP, and, Shell posted declines of 18%, 32%, and 26% respectively. http://goo.gl/PF6L68

November 02 2013 at 2:40 PM Report abuse rate up rate down Reply