Recently oil prices have fallen to their lowest levels this year on concerns over rising interest rates in the U.S. and uncertain global economic conditions. As prices continue to fall, OPEC+ announced its plans to opt against cutting production further. Oil prices have declined by approximately 20% over the past month, giving up all of this year’s gains.
Moreover, Goldman Sachs slashed their oil price forecast for the next year’s levels. The bank now estimates that the average price of Brent crude in 2023 will be $97.50 per barrel, down from their earlier prediction of $110 per barrel.
With inflation remaining elevated and the rising possibility of the Fed maintaining a restrictive policy stance, the market is expected to remain volatile. Amid this environment, investing in stocks that have gained momentum recently and are well-positioned to maintain the same based on their strong fundamentals and growth prospects, irrespective of the market movements, could be a good strategy.
Therefore, Marathon Petroleum Corporation (MPC) and Unit Corporation (UNTC), which have maintained strong momentum despite market fluctuations, could be ideal buys now.
Marathon Petroleum Corporation (MPC)
MPC operates as an integrated downstream energy company through two segments: Refining & Marketing and Midstream.
MPC’s total revenues and other income rose 44.8% year-over-year for the third quarter that ended September 30, 2022, to $47.24 billion. The company’s adjusted net income increased 731.3% year-over-year to $3.86 billion, while its adjusted EPS grew 969.9% from the prior-year quarter to $7.81. Also, its adjusted EBITDA came in at $6.83 billion, up 182.9% year-over-year.
In terms of forward non-GAAP P/E, MPC is currently trading at 4.32x, 44.3% lower than the industry average of 7.76x. Its forward EV/Sales multiple of 0.43 is 76.7% lower than the industry average of 1.83. In addition, its forward Price/Sales ratio of 0.29 is 77.7% lower than the industry average of 1.31.
Analysts expect MPC’s revenue and EPS to increase 9% and 352.7% year-over-year to $38.80 billion and $5.88, respectively, in the fiscal fourth quarter (ending December 31, 2022). It has surpassed the EPS estimates in each of the trailing four quarters.
Shares of MPC have gained 77.5% over the past year and 73.3% year-to-date to close the last trading session at $110.87.
MPC is currently trading above its 100-day and 200-day moving averages of $105.96 and $97.44, respectively, indicating an uptrend.
MPC’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to a Buy in our proprietary rating system.
It has an A grade for Momentum and Quality and a B for Growth. In the 92-stock B-rated Energy – Oil & Gas industry, MPC is ranked #7. To see additional POWR Ratings for MPC for Value, Stability, and Sentiment, click here.
Unit Corporation (UNTC)
UNTC engages in the exploration, acquisition, development, and production of oil and natural gas properties in the United States. The company operates through three segments: Oil and Natural Gas; Contract Drilling; and Mid-Stream.
For the second quarter of the fiscal year 2022 ended June 30, UNTC’s total revenues increased marginally year-over-year to $134.55 million. Income from operations rose 79.8% from the prior-year quarter to $70.16 million. Net income attributable to UNTC came in at $80.09 million and $7.82 per share, compared to a net loss of $12.99 million and $1.09 per share in the prior-year quarter.
The company is yet to report the third quarter results that ended September 30, 2022.
In terms of trailing-12-month EV/Sales, UNTC is currently trading at 0.57x, 69.9% lower than the industry average of 1.91x. Its trailing-12-month EV/EBITDA multiple of 1.67x is 76.3% lower than the industry average of 7.02x. In addition, the stock’s trailing-12-month EV/EBIT ratio of 1.99x is 77.9% lower compared to the industry average of 9.02x.
UNTC’s EPS is expected to increase by 44% per annum in the next five years. The stock has gained 80.9% over the past year and 78.3% year-to-date to close the last trading session at $57.60.
UNTC is currently trading above its 50-day and 200-day moving averages of $56.89 and $57.29, respectively, indicating an uptrend.
UNTC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
It has an A grade for Value, Momentum, and Quality. Within the same industry, it is ranked #5 out of 92 stocks. To see the other ratings of UNTC for Growth, Stability, and Sentiment, click here.
MPC shares were trading at $108.73 per share on Friday morning, down $2.14 (-1.93%). Year-to-date, MPC has gained 74.34%, versus a -18.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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