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In light of the increasing demand for oil and gas, the deteriorating geopolitical landscape, supply constraints, and rising oil prices, the energy sector is expected to witness stable growth in the near term. Against this backdrop, high-quality energy stocks Marathon Petroleum Corporation (MPC), DNOW Inc. could be a hit. (DNOW), and Matrix Service Company (MTRX) are strong buys now. Continue reading…
With increasing demand and limited supply, the oil and gas industry is expected to show resilience as oil prices rise. Given this backdrop, strong energy stocks are mainly led by Marathon Petroleum (Monetary Policy Committee), DNOW Company (DNOW), Matrix Services Company (MTRX) can be wise wallet additions now.
Oil prices have risen recently, with Brent crude oil price exceeds $87 On Monday, amid Russian retaliatory attacks on Ukrainian energy facilities, belonging to the Russian government Orders to reduce oil productionAnd the failure of mediation in the conflicts between Israel and Gaza. In addition, analysts expect supply tightening amid OPEC+ Extending production cuts.
Amid expectations of supply restrictions Strong growth in global oil demand For the years 2024 and 2025, it may lead to an increase in oil and gas prices in the future. OPEC expects oil demand to rise by 2.25 million barrels per day in 2024 and 1.85 million barrels per day in 2025. Global economic growth, which can support oil demand, is expected to reach 2.8% in 2024 and 2.9%. % in 2025. Morgan Stanley raised It expects the price of Brent crude to rise by $10 per barrel to $90 for the third quarter of fiscal year 2024.
Furthermore, energy stocks have outperformed the broader market in 2024, as evidenced by the Energy Sector SPDR Fund (XLE(11.2% gain, compared to the SPDR S&P 500 ETF Trust)spy) Profit of 9.7% during the same period.
With these positive trends in mind, let’s dive into the basics of these three energy sector stock picks.
Marathon Petroleum Company (Monetary Policy Committee)
MPC operates as an integrated energy company primarily in the United States through its refining, marketing, and transportation and conversion segments.
On March 11, MPC paid shareholders a dividend of $0.83 per share on common stock. The company pays an annual dividend of $3.30 per share, which translates to a dividend yield of 1.65% on the current stock price. The average four-year return is 3.62%. Over the past three and five years, MPC’s dividend payments have grown at a CAGR of 10.7% and 10.5%, respectively.
Additionally, in the fourth quarter ended December 31, 2023, the company returned approximately $2.80 billion of capital to shareholders through $2.50 billion of stock repurchases and $311 million of earnings. As of January 26, the company has repurchased an additional $0.90 billion of company stock. The company currently has approximately $5.90 billion available under its stock repurchase authorizations.
MPC’s trailing-12-month cash from operations of $14.12 billion is well above the industry average of $669.37 million. The trailing 12-month ROCE, ROTC, and ROTA are 37.12%, 13.88%, and 11.26%, which are 109.9%, 66.8%, and 71.4% higher than the industry averages of 17.68%, 8.32%, and 6.57%, respectively.
For the fiscal fourth quarter ended December 31, 2023, MPC’s revenue, other income and income from continuing operations totaled $36.82 billion and $2.40 billion, respectively.
Furthermore, adjusted EBITDA from continuing operations was $3.53 billion. In the same quarter, adjusted net income attributable to MPC and adjusted earnings per share were $1.51 billion and $3.98, respectively.
The Street expects MPC revenue and earnings per share for the first fiscal quarter ending in March 2024 to be $33.06 billion and $2.11, respectively. The company has beaten consensus EPS estimates in each of the trailing four quarters and consensus revenue estimates in three of the trailing four quarters, which is impressive.
The stock is up 79% over the past nine months to close the last trading session at $199.83. Over the past year, it has risen by 60.3%.
The MPC’s solid fundamentals are reflected in… Energy ratings. The stock has an overall rating of B, which equates to Buy in our rating system. POWR ratings are calculated by considering 118 different factors, with each factor weighted to its optimal score.
The stock has a grade of B for Momentum, Sentiment and Quality. Within limits Energy – oil and gas Industry, ranked No. 5 out of 83 stocks.
To see additional POWR ratings of MPC’s growth, value and stability, click here.
Dnaw Company (DNOW)
DNOW distributes energy and industrial products for petroleum refining, chemical processing, liquefied natural gas terminals, power generation facilities and industrial manufacturing operations in the United States, Canada and internationally. It operates under the brands DistributionNOW and DNOW.
On March 12, DNOW completed its all-cash acquisition of Whitco Supply, LLC, following completion of the regulatory approval process and other customary closing conditions. This acquisition strengthens DNOW’s capabilities and position in the transportation, exploration and production sector and target adjacent markets that have been key to the company’s growth strategy while increasing the company’s earnings and free cash flow capacity. Deploying capital strategically aligns with and enhances the Company’s commitment to increasing long-term value for shareholders and stakeholders.
DNOW’s trailing 12-month asset turnover ratio of 1.63x is 105.1% higher than the industry average of 0.79x. The 12-month return on equity (ROCE), ROTC and ROTA of 25.55%, 9.10% and 16.15% are 111.3%, 29.7% and 233.3% higher than the industry averages of 12.09%, 7.02% and 4.85. % respectively.
For the fiscal fourth quarter ending December 31, 2023, DNOW’s revenue increased 1.5% year over year to $555 million, while its operating profit was $32 million. Furthermore, non-GAAP EBITDA, excluding other costs, was $44 million.
For the same quarter, non-GAAP net income attributable to DNOW excluding other costs and non-GAAP earnings per share attributable to DNOW shareholders excluding other costs were $24 million and $0.22, respectively.
Street expects DNOW’s revenue and earnings per share for the fiscal year ending December 2024 to increase 2.8% and 6.4% year over year to $2.39 billion and $1.03, respectively. The company beat consensus revenue and EPS estimates in three of the trailing four quarters.
The stock has risen 45.9% over the past nine months to close the last trading session at $15.13. Over the past year, it has risen by 42.9%.
DNOW’s strong prospects are reflected in its POWR ratings. The stock has an overall rating of B, which equates to Buy in our rating system.
DNOW received a grade of A for value and momentum and a grade of B for quality. Within limits Energy – Services Industry, ranked No. 4 out of 50 stocks.
In addition to what we mentioned above, we also rated the stock in terms of Growth, Stability and Sentiment. Get all DNOW reviews here.
Matrix Services Company (MTRX)
MTRX designs, manufactures, builds and provides maintenance services to support critical energy infrastructure and industrial markets in the United States, Canada and internationally. It operates through three sectors: utilities and energy infrastructure; Industrial processes and facilities; and storage and terminal solutions.
On March 19, due to significant demand across Europe for infrastructure supporting sustainable energy resources, Matrix PDM Engineering, a subsidiary of MTRX, signed a memorandum of understanding with Engicon nv (Geldof), headquartered in Harelbeke, Belgium, allowing the team By jointly providing comprehensive engineering services. Procurement and construction solutions for ammonia storage across Europe.
MTRX’s relationship with Geldof provides customers across Europe with world-class storage and terminal solutions for ammonia, which is also used as a carrier for hydrogen, and brings additional strength to their technology and construction partnership offering to meet the growing global demand for more sustainable energy. resources.
MTRX’s trailing 12-month asset turnover ratio is 1.82x which is 128.6% higher than the industry average of 0.79x.
For the fiscal second quarter ending December 31, 2023, MTRX’s revenue was $175.04 million. Furthermore, its total profit was $10.59 million, compared to a total loss of $1.30 million in the same quarter last year.
As of December 31, 2023, MTRX’s total current assets and accounts payable were $267.31 million and $61.89 million, compared to $262.26 million and $76.37 million as of June 30, 2023, respectively.
The Street expects MTRX revenue for the fiscal third quarter ending March 2024 to increase 4.5% year over year to $195.29 million.
The stock has risen 171% over the past year to close the last trading session at $13.09. Over the past nine months, it has risen by 135.4%.
MTRX’s POWR ratings reflect its positive outlook. The stock has an overall rating of B, which equates to Buy in our rating system.
MTRX has a B for Growth, Momentum, and Sentiment. In the energy-services sector, it ranks No. 5.
click here For additional POWR ratings for MTRX (Value, Stability, Quality).
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MPC shares rose $0.09 (+0.05%) in pre-market trading on Tuesday. Year-to-date, the Monetary Policy Committee has achieved gains of 35.35%, compared to a 9.69% rise in the benchmark S&P 500 index during the same period.
About the author: Neha Panjwani
Right from her school days, Neha had a deep passion for finance, a passion that led her towards a career as an investment analyst after completing her bachelor’s degree in commerce. Neha is currently enrolled in the CFA program and is dedicated to continuing to enrich her understanding of the fundamentals of investing. Neha’s primary goal is to help individual investors discern optimal investment opportunities by carefully evaluating critical aspects of financial instruments, with a primary focus on stocks and ETFs. Its commitment is to empower individuals to make informed and strategic investment decisions in the dynamic world of finance.
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