Increasing global demand for oil and gas, coupled with constrained supplies, could keep the prices elevated in the near term. Given the industry tailwinds, let us probe into some energy stocks, Marathon Petroleum Corporation (MPC) and Permianville Royalty Trust (PVL) now.
Despite macroeconomic volatilities and geopolitical turmoil, the energy sector performed comparatively well than the other sectors. The energy sector is also anticipated to maintain a positive growth trajectory this year.
The global demand for oil and gas is expected to rise to record levels in 2023, primarily driven by the renewed economic activities in China. As per IEA, global oil demand will climb by 2 mb/d in 2023 to a record 101.9 mb/d.
In addition to the soaring demand, extra cuts by OPEC+ would most likely push the world oil supply down. Last month, Saudi Arabia and other OPEC+ oil producers announced further oil output cuts of around 1.16 mb/d.
Given this backdrop, quality energy stocks MPC and PVL could be wise portfolio additions now to capitalize on the current oil market dynamics and turbocharge the returns.
Marathon Petroleum Corporation (MPC)
MPC is involved in midstream and downstream businesses, such as petroleum product refining, marketing, and retail in the United States. The company operates through two segments: Refining & Marketing and Midstream transport.
On April 26, MPC’s board of directors declared a dividend of $0.75 per share on the common stock, payable to the shareholders on June 12. MPC’s annual dividend of $3 translates to a 2.70% yield on the current price level.
Its dividends have grown at 7% and 10.4% CAGRs over the past three and five years, respectively. Its four-year average dividend yield is 4.06%.
MPC’s trailing-12-month levered FCF margin of 6.72% is 12.3% higher than the industry average of 5.99%. Likewise, its trailing 12-month ROE, ROTC, and ROTA of 64.18%, 22.71%, and 18.84% are 169.9%, 108.1%, and 116.9% higher than the industry averages of 23.77%, 10.89%, and 8.69%, respectively.
For the fiscal first quarter that ended March 31, MPC’s total revenues and other income stood at $35.08 billion, while its adjusted EBITDA increased 97.7% year-over-year to $5.22 billion. Net income attributable to MPC rose 222.4% from the prior-year quarter to $2.72 billion, and its EPS came in at $6.09, up 308.7% year-over-year.
Analysts expect MPC’s revenue and EPS for the fiscal year ending December 2023 to come in at $138.94 billion and $17.97, respectively. MPC topped the consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 22.1% over the past year and 2.1% intraday to close the last trading session at $110.94.
It is no surprise that MPC has an overall B rating, equating to Buy in our POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
MPC has an A grade for Quality and a B for Value and Momentum. MPC ranks #12 of 92 stocks in the Energy – Oil & Gas industry.
Beyond what we have mentioned above, to see the additional POWR Ratings for Growth, Sentiment, and Stability for MPC, click here.
Permianville Royalty Trust (PVL)
PVL operates as a statutory trust. It acquires and holds net profits interest representing the right to receive 80% of the net profits from the sale of oil and natural gas production from properties located in the states of Texas, Louisiana, and New Mexico.
On April 17, PVL announced a cash distribution of $0.03 per unit, payable to unitholders on May 12. PVL pays a $0.36 per share dividend annually, translating to a 13.69% yield on the current share price.
Its four-year average dividend yield is 12.63%. The company’s dividend payouts have grown at CAGRs of 15.3% and 14.2% over the past three and five years, respectively.
PVL’s trailing-12-month gross profit margin of 100% is 115.2% higher than the industry average of 46.48%. Likewise, its trailing 12-month ROTC and ROTA of 14.12% and 22.26% are 29.4% and 156.3% higher than the industry averages of 10.92 and 8.69%, respectively.
For the fiscal year that ended December 31, 2022, PVL’s total gross profits stood at $62.15 million, up 43% year-over-year, while its distributable income rose 332.3% from the prior-year quarter to $13.48 million. Its cash and cash equivalents for the period stood at $922.91 thousand compared to $67.12 thousand as of December 31, 2021.
The stock has gained 2.3% over the past month and 4.4% intraday to close its last trading session at $2.63.
PVL’s strong fundamentals are reflected in its POWR Ratings system. It has an overall B rating, equating to Buy in our proprietary rating system.
PVL has a grade of A for Momentum and a B for Growth and Quality. PVL ranks #8 within the same industry.
Click here to see the additional POWR Ratings for Value, Sentiment, and Stability for PVL.
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MPC shares were trading at $112.13 per share on Wednesday morning, up $1.19 (+1.07%). Year-to-date, MPC has declined -3.09%, versus a 8.21% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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