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Put These 3 Oil Refining & Marketing Stocks on the Watchlist

The Zacks Oil and Gas - Refining & Marketing industry currently sits in the top 38% of the Zacks Industry Rank, boosting near-term expectations for the group.

Of late, refiners have been supported by a marked improvement in fuel product consumption — primarily gasoline and diesel — on the back of increasing travel and mobility. Per the U.S. Energy Department's latest release, gasoline inventories are around 8% below the five-year average, signaling robust oil product usage in the market. This indicates surging consumption of gasoline, diesel and other refined products. As economic activity remains resilient and Americans take to the road with a vengeance amid post-pandemic recovery, refined products’ usage should continue to gain traction throughout 2023. The refiners should also benefit from increased driving and accelerating international travel.

For those interested in the sector, we have earmarked three stocks — Murphy USA MUSA, Marathon Petroleum MPC and Phillips 66 PSX — all sporting solid fundamental and valuation profiles.

Let’s take a closer look at each one.

Murphy USA: This is a leading independent retailer of motor fuel and convenience merchandise in the United States. The proximity of Murphy USA’s fuel stations to Walmart supercenters helps the company to leverage the strong and consistent traffic that these stores attract. MUSA’s acquisition of QuickChek Corporation — a family-owned food and beverage chain located — is expected to help improve its offerings.

Murphy USA shares have found buyers over the last month, climbing 2% in value and outperforming the S&P 500 modestly. The company’s latest earnings results were solid too. MUSA posted earnings of $4.80 per share, 18% above the Zacks Consensus Estimate for earnings per share (EPS). Meanwhile, quarterly revenues of Zacks Rank #2 (Buy) Murphy USA totaled $5.1 billion, slightly above expectations.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Importantly, the company’s shares looks reasonable regarding valuation, with the current forward price-to-sales ratio of 0.28 sitting just above the five-year median and well below the Zacks that Oil – Energy sector average.

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Zacks Investment Research

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Finally, MUSA remains committed to returning excess cash to its shareholders through continued share buyback programs. As part of this initiative, the fuel retailer recently approved a repurchase authorization of up to $1.5 billion following the completion of the existing $1 billion mandate.

Marathon Petroleum: The company is a leading independent refiner, transporter and marketer of petroleum products. MPC’s $23.3 billion acquisition of Andeavor has integrated the premier assets of both companies, bolstering the scale and leadership position of the combined entity in the United States. As it is, Marathon Petroleum's access to the lower cost of crude in the Permian, Bakken and Canada helps it to benefit from the differentials. The stock carries a Zacks Rank #3 (Hold).

MPC reported last on May 2, and results came in above expectations. The company exceeded the Zacks Consensus Estimate for EPS by more than 6%. Quarterly revenues totaled $35.1 billion, $2.6 billion above estimates. Analysts have become bullish on the company’s current year, with the annual EPS estimate being revised nearly 2% higher in the past week.

MPC, which has a VGM Score of A, also remains committed to returning excess cash flow. The company repurchased $3.2 billion of shares and a further $1.2 billion worth of shares in April. Moreover, Marathon Petroleum gave an additional $5 billion share repurchase approval and currently has a remaining authorization of $9 billion.

In particular, shares could entice value-focused investors, with the current 5.66X forward earnings multiple sitting nicely beneath the 10.21X five-year median and Zacks sector average.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research


Phillips 66: Phillips 66 is one of the leading refining players in terms of size, efficiency and strength. The company buys, sells and refines crude oil and other feedstocks at its refineries. PSX, with a throughput capacity of 2 million barrels per day, owns an interest in 12 refineries in the United States and Europe. Moreover, it owns 7,110 branded U.S. outlets and 1,700 international ones.

Phillips 66’ adjusted first-quarter earnings more than tripled year over year to $4.21 a share, blowing by the consensus EPS estimates by 18%. The #3 Ranked company has now topped the Zacks Consensus Estimate for EPS by an average of 13.5% in the trailing four quarters.

Investors should also be pleased to know that its 4.43% dividend yield comfortably tops the S&P 500’s 1.51%. Meanwhile, PSX enjoys a VGM Composite Score of A.

Phillips 66’ valuation levels are looking attractive at the moment. It is trading at a 47% discount to its five-year median and a roughly 16% discount to the Zacks Oil-Energy sector at just 6.61X forward 12-month earnings.

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Zacks Investment Research

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Murphy USA Inc. (MUSA) : Free Stock Analysis Report

Marathon Petroleum Corporation (MPC) : Free Stock Analysis Report

Phillips 66 (PSX) : Free Stock Analysis Report

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