Oil prices eased today ahead of talks between the United States and Iran over the potential for a nuclear deal revival. However, Brent Crude and U.S. West Texas Intermediate are trading above the $90 per barrel mark. Both oil contracts recently hit seven-year highs, supported by strong global demand. And according to IHS Markit Ltd. (INFO) Vice-Chairman Daniel Yergin, oil prices will go up to $100 per barrel if Russia invades Ukraine.
In addition, U.S. gasoline prices have risen eight cents over the last week on Russia-Ukraine tensions. And the nationwide average price for a gallon of gas increased to $3.42 on Monday.
With the global oil refining market forecasted to reach $3.75 trillion by 2030, growing at a 5.3% CAGR, the stocks of fundamentally strong oil and gas refining companies Marathon Petroleum Corporation (MPC), Phillips 66 (PSX), Valero Energy Corporation (VLO), Valvoline Inc. (VVV), and Sunoco LP (SUN) might now be solid additions to one’s investment portfolio.
Marathon Petroleum Corporation (MPC)
MPC in Finlay, Ohio, operates as a refining, marketing, retailing, and transportation company of petroleum products, primarily in the United States. The company operates through the two broad segments of Refining & Marketing and Midstream.
On Jan. 27, MPC declared a dividend of $0.58 per share on the common stock, payable to shareholders on March 10, 2022. The dividend declaration reflects on the company’s ability to pay back shareholders.
On Dec. 14, MPC and Archer Daniels Midland Company (ADM) announced the closing of their joint venture to produce soybean oil. The joint venture named Green Bison Soy Processing, LLC is expected to operate a soybean processing complex in Spiritwood, N.D., which is expected to complete in 2023. The complex should provide significant feedstock and add to the company’s revenue.
For the fiscal fourth quarter ended, December 31, MPC’s total revenues and other income increased 95.8% year-over-year to $35.61 billion. Adjusted net income attributable to MPC and adjusted net income per share came in at $794 million and $1.30, up substantially from their negative year-ago values. Adjusted EBITDA from continuing operations rose 481.1% from the prior-year quarter to $2.80 billion.
The consensus EPS estimate of $0.84 for the quarter ending March 2022 indicates a 520% year-over-year increase. Likewise, the consensus revenue for the same period of $31.05 billion reflects an improvement of 64.2% from the prior-year period. Moreover, MPC has an impressive surprise earnings history; it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 67.5% in price over the past year and 39.1% over the six months to close yesterday’s trading session at $79.83.
MPC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
MPC has a Growth, Momentum, and Quality grade of B. In the 82-stock Energy – Oil & Gas industry, it is ranked #17. The industry is rated B. Click here to see the additional POWR Ratings for MPC (Value, Stability, and Sentiment).
Phillips 66 (PSX)
PSX is a Houston, Tex.-based energy manufacturing and logistics company that operates through the Midstream; Chemicals; Refining; and Marketing & Specialties (M&S) segments. The company transports crude oil, produces and markets ethylene, refines crude oil and other feedstocks, and purchases gasoline, distillates, and aviation fuel for resale.
On February 7, PSX and H2 Energy Europe announced their commitment to developing up to 250 retail hydrogen refueling stations across Germany, Austria, and Denmark by 2026 through a joint venture between their subsidiaries. This should bolster the company’s position in the hydrogen fuel sector.
On January 19, Phillips 66 and NOVONIX Limited declared that they had signed a technology development agreement to advance the production and commercialization of next-generation anode materials for lithium-ion batteries. The deal is expected to accelerate the development of materials for the U.S. battery supply chain.
PSX’s total revenues and other increased 100.2% year-over-year to $33.57 billion in its fiscal fourth quarter of 2021. Its adjusted earnings came in at $1.30 billion, while adjusted EPS stood at $2.94, both substantially up from their negative year-ago values.
The Street’s $1.68 EPS estimate for the quarter ending March 31, 2022, reflects a 244.8% year-over-year rise. And the Street’s $32.67 billion revenue estimate for the same quarter indicates a 49% increase from the same period the prior year. In addition, PSX has topped consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 25.3% in price and gained 22.1% over the past six months to close yesterday’s trading session at $90.29.
It is no surprise that PSX has an overall B rating, which translates to Buy in our POWR Rating system. The stock has a B grade for Growth and Momentum. It is ranked #18 in the Energy – Oil & Gas industry. To see the additional POWR ratings for Value, Stability, Sentiment, and Quality for PSX, click here.
Valero Energy Corporation (VLO)
VLO operates internationally as a manufacturer and seller of transportation fuels and petrochemical products. Operating through the three broad segments of Refining; Renewable Diesel; and Ethanol, the San Antonio, Tex.-based company participates in oil and gas refining, marketing, and bulk selling activities.
On February 2, VLO priced $650 million of 4.0% Senior Notes due 2052. The company intends to use the net proceeds from this offering to finance its cash tender offers to repurchase senior notes issued by Valero Energy Partners LP and for general corporate purposes.
On January 20, VLO declared a 0.98 per share quarterly dividend on its common stock, payable on March 3. This reflects upon the company’s ability in cash generation and shareholder returns.
For its fiscal fourth quarter, ended December 31, VLO’s revenues increased 116.2% year-over-year to $35.90 billion. Its adjusted net income, attributable to VLO stockholders and adjusted earnings per common share, came in at $1.01 billion and $2.47, respectively, with both registering a considerable increase over their negative year-ago values.
Analysts expect VLO’s EPS to increase 180.9% year-over-year to $1.40 for its fiscal first quarter, ending March 31, 2022. The Street expects its revenue to come in at $28.81 billion for the same quarter, indicating a 54.5% improvement from the prior-year period. In addition, VLO has beaten consensus EPS estimates in each of the trailing four quarters.
VLO’s shares have gained 45.2% in price over the past year and 34.8% over the past six months to close yesterday’s trading session at $89.63.
This promising outlook is reflected in VLO’s POWR ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. VLO has a Growth and Momentum grade of B. It is ranked #11 in the Energy – Oil & Gas industry. Click here to see the additional POWR Ratings for Value, Stability, Sentiment, and Quality for VLO.
Valvoline Inc. (VVV)
VVV is a manufacturer, marketer, and supplier of engine and automotive maintenance products and services, operating through the Retail Services and Global Products segments. The Lexington, Ky.-based company’s offerings include lubricants for passenger cars, coolants for original equipment manufacturers, and functional and maintenance chemicals.
On February 7, VVV announced that it had begun piloting electric vehicle (EV) services in its retail stores. Heidi Matheys, Chief Marketing & Transformation Officer of VVV, said, “As Valvoline continues to transform its retail offerings and extend its existing offerings to EV owners, we are able to offer our quick, easy, trusted approach to automotive maintenance regardless of a vehicle’s power source.”
On December 1, VVV announced that it had become a partner with Arrival (ARVL), an EV company, and named one of ARVL’s initial service partners in its Service Network Program in the United States. The partnership aligns with VVV’s strategy of advancing its preventive auto maintenance service model to EV and hybrids.
VVV’s sales increased 28.1% year-over-year to $835 million for its fiscal fourth quarter, ended September 30. Its adjusted net income rose 8.4% from the prior-year quarter to $90 million, while adjusted EPS came in at $0.50, up 11.1% from the same period the prior year. Its adjusted EBITDA improved 5.4% from the prior-year period to $155 million.
The Street’s $2.13 EPS estimate for its fiscal 2022 reflects a 9.2% increase from the prior year, while the Street’s $3.53 billion revenue estimate for the same year indicates an 18.5% year-over-year improvement. VVV has topped consensus EPS estimates in each of the trailing four quarters.
Over the past year, VVV’s stock has gained 37.4% in price to close yesterday’s trading session at $32.57. It has gained 4.4% over the past six months.
VVV’s promising prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our POWR Rating system. VVV has a Quality grade of B. It is ranked #13 in the Energy – Oil & Gas industry. Click here to see the additional POWR Ratings for VVV (Growth, Value, Momentum, Stability, and Sentiment).
Sunoco LP (SUN)
SUN is Dallas, Tex.-based distributor and retailer of motor fuels in the United States. The company operates through the two broad segments of Fuel Distribution and Marketing, purchasing motor fuels from independent refiners and oil companies and supplying independent dealer stations; and All Other, for offering motor fuel, merchandise, and food services.
On January 26, SUN declared a quarterly distribution for the fourth quarter of 2021 of $0.8255 per common unit or $3.3020 per common unit on an annualized basis, payable to shareholders on February 18. This indicates the company’s ability in sustainable cash generation.
For its fiscal third quarter, ended September 30, SUN’s total revenues increased 70.4% year-over-year to $4.78 billion. Its operating income improved 4.1% from the prior-year period to $153 million. Its net income and comprehensive income rose 4% from the prior-year quarter to $104 million, while its net income per common unit came in at $1.00, up 4.2% year-over-year.
The consensus EPS estimate for the fiscal fourth quarter (ended December 2021) of $1.13 indicates a 46.8% year-over-year increase. Likewise, the $4.60 billion consensus revenue estimate for the same period reflects a rise of 80.1% from the prior-year quarter.
The stock has gained 36.2% in price over the past year and 18.9% over the past six months to close yesterday’s trading session at $44.03.
SUN has an overall B rating, equating to Buy in our proprietary rating system. The stock has a Value and Momentum grade of A. In the 34-stock MLPs – Oil & Gas industry, it is ranked #5. The industry is rated A.
In addition to the POWR Rating grades we have stated above, one can see SUN’s ratings for Growth, Stability, Sentiment, and Quality here.
MPC shares were trading at $79.39 per share on Tuesday afternoon, down $0.44 (-0.55%). Year-to-date, MPC has gained 24.07%, versus a -5.16% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
5 Oil & Gas Refining Stocks to Buy as Energy Prices Soar StockNews.com
