Oil prices rose to a 13-week high yesterday, with increasing demand for gasoline despite the record pump prices. Oil prices were also boosted by expectations of improving China’s oil demand and supply concerns in several countries. Brent futures rose 2.3% to $123.34 a barrel, while the U.S. West Texas Intermediate (WTI) crude rose by $2.70 to $122.11.
Furthermore, the geopolitical uncertainty and the ongoing impact of the pandemic are expected to keep oil prices elevated. "Although we expect the current upward pressure on energy prices to lessen, high energy prices will likely remain prevalent in the US this year and next," EIA Administrator Joe DeCarolis said.
Given this backdrop, we think refining stocks Valero Energy Corporation (VLO), Marathon Petroleum Corporation (MPC), and Phillips 66 (PSX), which have been gaining significantly in price this year, could be valuable additions to one’s portfolio now.
Valero Energy Corporation (VLO)
VLO manufactures, markets, and sells transportation fuels and petrochemical products in the United States, Canada, the United Kingdom, Ireland, and internationally. The company operates through three segments: Refining; Renewable Diesel; and Ethanol.
VLO’s revenues increased 85.2% from the prior-year quarter to $38.54 billion in the fiscal quarter ended March 31, 2022. Net cash provided by operating activities for the quarter came in at $588 million, reflecting an increase of 1,230.8% year-over-year, while the current assets stood at $23.31 billion, up 10.1% year-over-year.
The consensus EPS estimate of $5.71 for the fiscal first quarter ending June 2022 represents a 1,089.4% improvement year-over-year. The consensus revenue estimate of $37.36 billion for the same quarter represents a 34.7% increase from the same period last year. It has an impressive earnings surprise history, as it topped Street EPS estimates in each of the trailing four quarters.
VLO’s shares have gained 72.7% over the past year to close the last trading session at $143.77. The stock has gained 103.3% over the past six months.
VLO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, translating to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
VLO has an A grade in Momentum and a B in Growth and Quality. It is ranked #15 of 100 stocks in the B-rated Energy - Oil & Gas industry.
Beyond what is stated above, we’ve also rated VLO for Stability, Sentiment, and Value. Get all the VLO ratings here.
Marathon Petroleum Corporation (MPC)
MPC operates as an integrated downstream energy company primarily in the United States. It operates in two segments’ Refining & Marketing; and Midstream.
MPC’s total revenues and other income increased 67.7% year-over-year to $38.38 billion in the fiscal quarter ended March 31, 2022. Its net income grew 1,731.3% from the year-ago value to $1.17 billion, while its EPS increased 502.7% from its year-ago value to $1.49.
Street expects MPC’s EPS for the current quarter to improve 665.4% year-over-year to $5.13. The consensus revenue estimate of $41 billion for the same period represents a 37.5% increase year-over-year. The company also surpassed the consensus EPS estimates in each of the trailing four quarters.
MPC has gained 76.1% over the past year and 76.4% year-to-date to close the last trading session at $112.87.
It is no surprise that MPC has an overall B rating, equating to Buy in our POWR Ratings system. The stock has an A grade in Growth and Momentum and a B in Quality. MPC is ranked #7 in the same industry.
In addition to the POWR Rating grades I’ve just highlighted, you can see the MPC’s ratings for Stability, Value, and Sentiment here.
Phillips 66 (PSX)
PSX operates as an energy manufacturing and logistics company through four segments: Midstream; Chemicals; Refining; and Marketing and Specialties (M&S).
On June 1, PSX signed a letter of intent with FreeWire Technologies to support its first electric-vehicle charging program in the United States. It highlights PSX’s commitment to pursuing lower-carbon solutions and endorses FreeWire’s ultrafast, battery-integrated charging technology in PSX’s fueling stations.
In May, the company decided to move forward with Rodeo Renewed, the project to convert its San Francisco Refinery in Rodeo, California, into one of the world’s largest renewable fuels facilities. The project is expected to help meet the demand for lower-carbon fuels, achieve the company’s climate goals, and create long-term value for shareholders.
For the fiscal first quarter ended March 2022, PSX’s total revenues and other income increased 67.5% year-over-year to $36.72 billion. The net income attributable to PSX grew 189% from the year-ago value to $582 million. EPS for the quarter stood at $1.29, reflecting a 186.6% increase year-over-year.
PSX’s revenue for the current quarter is expected to come in at $36.11 billion, indicating a 29.5% year-over-year growth. The company’s EPS is expected to increase 465.8% year-over-year to $4.19 for the same quarter. PSX also beat the consensus EPS estimates in the trailing four quarters.
Over the past six months, the stock has gained 53.4% to close yesterday’s trading session at $110.25. It has gained 52.2% year-to-date.
The company has an overall rating of B, translating to Buy in our proprietary ratings system. PSX is rated A in Growth and Momentum and a B in Sentiment. Within the same industry, it is ranked #16. Click here for additional PSX’s POWR Ratings for Value, Quality, and Stability.
VLO shares rose $0.10 (+0.08%) in after-hours trading Monday. Year-to-date, VLO has gained 78.68%, versus a -20.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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