3 Highly Ranked Energy Stocks to Buy Now
The energy sector has recently experienced bearish sentiment as oil prices broke down below $70, which had been a significant level for many investors. However, oil prices have rebounded aggressively, and OPEC publicly committed to limiting production and tightening oil supply, thus putting a floor beneath the market. Given this outlook, several energy stocks look promising, and using the Zacks Rank, three highly-ranked stocks are identified as good picks for investment over the next few months: Par Pacific, CVR Energy, and Valero Energy.
Outline
• Introduction
• Oil prices and the energy sector
• Par Pacific
• Overview and operations
• Strong performance and earnings outlook
• Valuation
• CVR Energy
• Conclusion
• FAQs
Oil prices and the energy sector
Over the last few weeks, sentiment in the energy sector has become very bearish. After Oil prices peaked back in mid-2022 at around $130 a barrel, they have been grinding lower. Most recently oil prices broke down below $70, which seemed to be a major level for many investors. But after breaking down, oil prices have reversed higher quite aggressively, and are already back above the $70 level. It is possible that after such a long period of bullish sentiment, the oil market needed to shake the late comers before setting up another bull move higher. Furthermore, a couple weeks ago, OPEC publicly committed to limiting production and tightening oil supply, thus putting a floor beneath the market.
Par Pacific
Par Pacific manages and maintains energy and infrastructure businesses, operating refining, retail, and logistics for energy assets. PARR also markets and distributes crude oil from the Western U.S. and Canada to refining hubs in the Midwest, Gulf Coast, East Coast and to Hawaii. Par Pacific was formerly known as Par Petroleum Corporation and is headquartered in Houston, Texas.
Par Pacific has performed extremely well this year, even with the weakness in oil prices. PARR has considerably outperformed the industry and broad market, with a three-year stock price increase of 300%. PARR is a Zacks Rank #1 (Strong Buy) stock, indicating upward trending earnings revisions. While current quarter and next quarter estimates have seen some mixed revisions, current year and next year have been upgraded significantly. Next year’s earnings have been revised higher by 286%.
Parr Pacific is currently trading at a one-year forward earnings multiple of 4x, which is in line with its two-year median, and just below the industry average 5x.
CVR Energy
CVR Energy is an independent refiner and marketer of high-value transportation fuels such as gasoline and diesel, headquartered in Sugar Land, Texas. CVI owns and operates a coking medium-sour crude oil refinery in Kansas and a crude oil refinery in Oklahoma. The business serves retailers, railroads, farms, and other refineries and marketers.
CVR Energy is currently a Zacks Rank #1 (Strong Buy) stock, indicating upward trending earnings revisions. CVI has been a strong performing stock over the last year, and it also offers a hefty dividend yield of 6.8%. Over the next few earnings periods, sales are expected to fall, but current quarter earnings are still expected to skyrocket 4,300% YoY to $0.88 per share. Over the last 60 days, analysts have unanimously revised earnings higher across all reporting periods. Current year earnings expectations have nearly doubled over the last 60 days, which is a very positive sign for investors.
Another factor that makes CVR Energy an attractive stock to consider is its strong financial position. The company has a solid balance sheet, with a low debt-to-equity ratio and a strong cash position, which means that it is well-positioned to withstand economic downturns and invest in future growth opportunities.
Valero Energy
Valero Energy VLO is a deeply diversified oil refinery company with 15 plants across the U.S., Canada, and the Caribbean and capacity to refine 3.2 million barrels a day. The majority of VLO’s refinery plants are located in the Gulf Coast with easy access to export facilities, boosting margins. Valero recently reported strong fourth-quarter results with a 13% upside surprise on EPS.
VLO stock has been a very strong performer over the last year. Even with the substantial move lower in the price of oil, Valero stock has remained strong.
Valero Energy earns a Zacks Rank #2 (Buy), indicating upward trending earnings revisions. Current quarter earnings are expected to climb 186% YoY to $6.62 per share, while current quarter sale are expected to drop -13% to $33.5 billion.
VLO is trading at a very reasonable 5x one-year forward earnings, which is in line with the industry and well below its five-year median of 13x. VLO also offers a dividend yield of 3.2%, which has been raised by an average of 4.8% annually over the last five years.
Conclusion
While the energy sector may have faced a recent bearish sentiment, there are still many promising opportunities for investors. By using the Zacks Rank, we have identified three highly ranked energy stocks that have strong potential for growth and profitability. Par Pacific, CVR Energy, and Valero Energy have all demonstrated strong performance in the face of market weakness and have upward trending earnings revisions. Furthermore, they are all trading at reasonable multiples and offer attractive dividend yields. Investors looking for exposure to the energy sector should consider these three stocks as potential buys.
FAQs
1. What is the Zacks Rank?
The Zacks Rank is a proprietary stock-rating system that ranks stocks on their earnings estimate revisions over the past 60 days. A high Zacks Rank indicates upward earnings estimate revisions and therefore higher potential for future profitability.
2. Why have energy stocks faced bearish sentiment recently?
Oil prices have been in a downtrend after peaking in mid-2022, which has put pressure on energy stocks. Furthermore, concerns over global economic growth and the Omicron variant have led to uncertainty in the market.
3. What is Par Pacific?
Par Pacific is a company that manages and maintains energy and infrastructure businesses. It operates refining, retail, and logistics for energy assets, and markets and distributes crude oil from the Western U.S. and Canada to refining hubs in the Midwest, Gulf Coast, East Coast, and Hawaii.
4. What is CVR Energy?
CVR Energy is an independent refiner and marketer of high value transportation fuels such as gasoline and diesel. It owns and operates a coking medium-sour crude oil refinery in Kansas and a crude oil refinery in Oklahoma.
5. What is Valero Energy?
Valero Energy is an oil refinery company with 15 plants across the U.S., Canada, and the Caribbean and capacity to refine 3.2 million barrels a day. The majority of Valero’s refinery plants are located in the Gulf Coast with easy access to export facilities, boosting margins.