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Buy the Dip in these Oil & Energy Stocks with Crude Prices Under $70

With crude prices falling under $70 a barrel, investors may be eyeing opportunities among oil and energy stocks as the sector has largely outperformed the broader market over the last few years.

Here is a look at two Zacks Rank #1 (Strong Buy) Oils & Energy stocks that investors may want to consider as their earnings estimate revisions have trended higher despite crude oil prices declining.

CVR Energy (CVI)

The Oil and Gas – Refining and Marketing Industry is currently in the top 7% of over 249 Zacks industries with CVR Energy standing out at the moment.

CVR is an independent refiner and marketer of high-value transportation fuels. In addition to its petroleum business which includes a crude oil gathering system, CVR also produces ammonia, urea ammonia nitrate fertilizers, and provides storage and terminal facilities for asphalt and refined fuels.

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Not primarily reliant on crude oil prices, fiscal 2023 earnings estimate revisions have continued to trend higher for CVR in the last week. Earnings estimates have now soared 62% throughout the quarter for FY23 and 32% for FY24.

Zacks Investment Research
Zacks Investment Research


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In addition to its Zacks Rank #1 (Strong Buy), CVR stock has an overall “A” VGM Style Scores grade for the combination of Value, Growth, and Momentum. CVR’s valuation is attractive trading at $29 per share and 8.9X forward earnings.

This is slightly above the industry average of 6.1X but much more reasonable than its decade high and a discount to the median of 11.6X. Plus, CVR (CVI) stock is still up +36% in the last year to largely outperform the S&P 500’s -12% and the Oil Refining & Marketing Markets +11%.

Zacks Investment Research
Zacks Investment Research


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Valero Energy (VLO)

Another stock that stands out as it is not completely reliant on crude oil prices is Valero Energy. Also part of the top-rated Oil and Gas – Refining and Marketing Industry, Valero Energy is the largest independent refiner and marketer of petroleum products in the U.S. but is a leading ethanol producer as well.

Valero has over 14 ethanol plants in the Midwest that have a combined capacity of 1.73 billion gallons per year. More impressive, Valero’s FY23 earnings estimates have jumped 30% over the last 90 days with FY24 estimates climbing 48%

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Valero also has an overall “A” VGM grade with its valuation especially intriguing at current levels of $125 per share and just 5.2X forward earnings. This is much lower than its extreme decade-long high and a 55% discount to the median 11.7X with rising earnings estimates offering further support.

Even better, Valero stock is up +38% over the last year to easily top the S&P 500 and the Oil Refining & Marketing Market. Furthermore, over the last three years, Valero stock has skyrocketed +257% to also crush the benchmark and beat its Zack Subindustry’s +188%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Takeaway

CVR Energy and Valero’s attractive P/E valuations along with rising earnings estimates revisions is very intriguing and there could certainly be more upside in their stocks even as crude oil prices decline. While these companies are able to profit from higher oil prices they are not reliant on the global commodity and should continue to benefit from their diverse businesses.

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Zacks Investment Research