Russia’s invasion of Ukraine earlier this year sent crude oil prices soaring because of the sanctions on Russian oil. Production cuts by OPEC+ also contributed to rising oil prices. The recent G7 price cap of $60 on Russian seaborne crude oil exports will likely make the country cut its oil output, leading to further supply pressure.
However, despite the potential supply shortage and increase in demand due to the easing of COVID-19 restrictions in China, oil prices recently fell to their lowest levels this year on concerns over uncertain global economic conditions.
According to a Reuters report, UBS analyst Giovanni Staunovo said, "Oil markets will likely stay volatile in the near term, driven by COVID headlines in China and central bank policies in the U.S. and Europe."
On the other hand, the U.K. and the U.S. have formed a new energy partnership focused on boosting energy security and reducing prices. The partnership will work to reduce global dependence on Russian energy exports, stabilize energy markets, and step-up collaboration on energy efficiency, nuclear, and renewables.
Given this backdrop, fundamentally strong oil and gas stocks Marathon Petroleum Corporation (MPC), Valero Energy Corporation (VLO), Berry Corporation (BRY), and Unit Corporation (UNTC) could be wise additions to your portfolio before the winter freeze.
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.
Over the last three years, MPC’s dividend payouts have grown at a 5.5% CAGR. Its four-year average dividend yield is 4.16%, and its forward annual dividend of $3.00 per share translates to a 2.74% yield. It is expected to pay a quarterly dividend of $0.75 per share on December 12, 2022.
For the fiscal third quarter ended September 30, 2022, MPC’s total revenues increased 44.8% year-over-year to $47.24 billion. The company’s net income attributable to MPC increased 545.1% year-over-year to $4.48 billion.
Its adjusted EBITDA from continuing operations increased 182.9% year-over-year to $6.83 billion. In addition, its net EPS came in at $9.06, representing a 731.2% increase from the year-ago quarter.
MPC’s EPS and revenue for the quarter ending December 31, 2022, are expected to increase 359.1% and 9.6% year-over-year to $5.97 and $39.04 billion, respectively. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. The stock has gained 74.8% year-to-date to close the last trading session at $109.00.
MPC’s POWR Ratings reflect solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the B-rated Energy - Oil & Gas industry, it is ranked #6 out of 91 stocks. The stock has an A grade for Momentum and Quality and a B for Growth.
Click here to see the additional POWR ratings of MPC for Value, Stability, and Sentiment.
Valero Energy Corporation (VLO)
VLO manufactures, markets, and sells transportation fuels and petrochemical products internationally. The company operates through three segments: Refining, Renewable Diesel, and Ethanol.
Over the last three years, VLO’s dividend payouts have grown at a 2.9% CAGR. Its four-year average dividend yield is 5.08%, and its forward annual dividend of $3.92 per share translates to a 3.30% yield. It is expected to pay a quarterly dividend of $0.98 per share on December 8, 2022.
For the fiscal third quarter ended September 30, 2022, VLO’s revenues increased 50.6% year-over-year to $44.45 billion. Its operating income increased 447.2% from the year-ago period to $3.79 billion. Its net income attributable to VLO increased 508.4% year-over-year to $2.82 billion. In addition, its EPS came in at $7.19, representing a 536.3% increase from the prior-year quarter.
VLO’s EPS and revenue for the quarter ending December 31, 2022, are expected to increase 183.4% and 18.8% year-over-year to $7.00 and $42.64 billion, respectively. It has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. The stock has gained 60% year-to-date to close the last trading session at $120.19.
It is no surprise that VLO has an overall rating of B, which translates to a Buy in our proprietary POWR Ratings system. It is ranked #9 in the Energy - Oil & Gas industry. Moreover, it has an A grade for Momentum and a B for Growth, Value, and Quality.
To see the additional ratings of VLO for Stability and Sentiment, click here.
Berry Corporation (BRY)
BRY, an independent upstream energy company, develops and produces conventional oil reserves in the western United States. It operates in two segments, Development and Production and Well Servicing and Abandonment.
BRY’s total revenues for the fiscal third quarter ended September 30, 2022, increased 162.5% year-over-year to $376.45 million. Its adjusted net income increased 294.5% year-over-year to $45.52 million.
Its adjusted EBITDA increased 63.5% year-over-year to $96.98 million. In addition, its EPS on adjusted net income came in at $0.55, representing a 292.9% increase from the prior-year quarter.
Analysts expect BRY’s EPS for the quarter ending December 31, 2022, to increase 152.1% year-over-year to $0.30. Its revenue for the quarter ending March 31, 2023, is expected to increase 107.1% year-over-year to $194.87 million.
It has a commendable earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. The stock has gained 5.1% year-to-date to close the last trading session at $7.66.
BRY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. Within the Energy - Oil & Gas industry, it is ranked #2. The company has an A grade for Value and Momentum and a B for Growth and Sentiment.
Click here to see the POWR Ratings of BRY for Stability and Quality.
Unit Corporation (UNTC)
UNTC engages in the exploration, acquisition, development, and production of oil and natural gas properties in the United States. It operates through three segments: Oil and Natural Gas, Contract Drilling, and Mid-Stream.
UNTC’s total revenues for the fiscal second quarter ended June 30, 2022, increased marginally year-over-year to $134.55 million. The company’s income from operations increased 79.8% year-over-year to $70.16 million.
Its net income attributable to UNTC increased 716.4% year-over-year to $80.09 million. Additionally, its net EPS attributable to UNTC came in at $7.82, representing an 817.4% increase from the year-ago period.
The stock has gained 71.2% year-to-date to close the last trading session at $55.30.
UNTC’s positive outlook is reflected in its POWR Ratings. The company has an overall rating of A, which equates to a Strong Buy. Again, it is ranked #5 in the same industry. In addition, it has an A grade for Value, Momentum, and Quality.
Click here to see the additional ratings of UNTC for Growth, Stability, and Sentiment.
MPC shares were unchanged in premarket trading Thursday. Year-to-date, MPC has gained 74.77%, versus a -16.26% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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