While geopolitical tensions and macroeconomic volatility marred the overall economy last year, the oil and gas sector performed significantly well. The Energy Select Sector SPDR Fund (XLE) has gained 41.8% over the past year, whereas the SPDR S&P 500 ETF Trust (SPY) declined 16% over the same period.
Reopening the Chinese borders after strict COVID-19 restrictions have spurred optimism and could push the oil prices further up from the current levels. On top of it, Morgan Stanley (MS) expects the oil market to tighten during the third and fourth quarters of this year due to a recovery in demand prompted by China reopening its borders, among other factors.
In addition, the EU embargo on Russian fuel imports by sea, which begins on February 5, is another bullish factor for oil prices. Moreover, OPEC+ is bent on keeping the oil market tight to prevent prices from dropping if a recession materializes.
Against this backdrop, it might be wise to add quality energy stocks Marathon Petroleum Corporation (MPC), Berry Corporation (BRY), and Unit Corporation (UNTC) to your portfolio to garner significant returns.
Marathon Petroleum Corporation (MPC)
MPC operates as an integrated downstream energy company, mainly in the United States. It operates through its two broad segments: Refining & Marketing and Midstream.
In December 2022, MPC declared that six of its refineries and its San Antonio office building had received 2022 ENERGY STAR efficiency certifications from the U.S. Environmental Protection Agency (EPA). The EPA recognition might benefit the company.
In November, MPC declared a dividend of $0.75 per share on its common stock, reflecting an increase of approximately 30% over its previous dividend. The dividend was payable to shareholders on December 12. This reflects the shareholder return ability of the company.
The stock’s trailing-12-month ROTA of 13.34% is 93.8% higher than the industry average of 6.88%. Its trailing-12-month ROCE of 43.83% is 111.9% higher than the industry average of 20.68%.
MPC’s total revenues and other income rose 44.8% year-over-year to $47.24 billion for the fiscal third quarter that ended September 30. The company’s adjusted net income increased 731.3% year-over-year to $3.86 billion, while its adjusted EPS grew 969.9% from the prior-year quarter to $7.81. Also, its adjusted EBITDA came in at $6.83 billion, up 182.9% year-over-year.
For the fiscal first quarter (ending March 2023), analysts expect MPC’s EPS to increase 129.3% year-over-year to $3.32, while its revenue is expected to come in at $37.35 billion. In addition, it surpassed the EPS and revenue estimates in each of the trailing four quarters, which is impressive.
MPC’s shares have gained 15.3% over the past three months and 8.8% over the past month to close the last trading session at $121.01.
MPC’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Momentum and Quality and a B for Growth. In the 92-stock B-rated Energy – Oil & Gas industry, MPC is ranked #7.
To see the additional POWR Ratings for Value, Stability, and Sentiment for MPC, click here.
Berry Corporation (BRY)
BRY is an independent upstream energy company that develops and produces conventional oil reserves in the western United States. It operates in two segments, Development and Production; and Well Servicing and Abandonment.
On November 2, 2022, the company’s board of directors declared a dividend totaling $0.47 per share on its outstanding common stock. The variable and fixed portion of the dividends were payable to shareholders on November 28. This reflects on BRY’s cash generation ability.
The stock’s trailing-12-month gross profit margin of 52.25% is 27.8% higher than the industry average of 40.90%. Its trailing-12-month EBIT margin of 24.84% is 28.8% higher than the industry average of 19.29%. Also, its trailing-12-month net income margin of 20.07% is 76.4% higher than the industry average of 11.38%.
BRY’s total revenues and other came in at $376.45 million for the third quarter that ended September 30, up 162.5% year-over-year. Its adjusted net income came in at $45.52 million, up 294.5% year-over-year. Also, its earnings per share on adjusted net income came in at $0.55, up 292.9% year-over-year.
BRY’s revenue is expected to increase 86.3% year-over-year to $175.25 million in the fiscal first quarter (ending March 2023). Its EPS is expected to come in at $0.29 in the same quarter. BRY topped Street EPS and revenue estimates in three out of the trailing four quarters.
BRY’s shares have gained 20.3% over the past six months to close the last trading session at $8.59. It has also gained 9.2% over the past five days.
BRY’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to Buy in our proprietary rating system.
It has an A grade for Value and Momentum and a B for Growth. It is ranked #6 in the same industry.
Click here to see BRY’s additional POWR Ratings for Stability, Sentiment, and Quality.
Unit Corporation (UNTC)
UNTC explores, acquires, develops, and operates oil and natural gas properties in the United States. The company operates through its three broad segments: Oil and Natural Gas; Contract Drilling; and Mid-Stream.
On January 5, UNTC announced a special cash dividend of $10 per share and approved a quarterly cash dividend policy beginning in its second quarter. The special dividend is payable to shareholders on January 31. This reflects the company’s ability to pay back its shareholders.
The stock’s trailing-12-month gross profit margin of 48.23% is 17.9% higher than the industry average of 40.90%. Its trailing-12-month EBIT margin of 28.86% is 49.6% higher than the industry average of 19.29%. Also, its trailing-12-month net income margin of 23.85% is 109.6% higher than the industry average of 11.38%.
For the fiscal quarter ended September 30, UNTC’s income from operations rose 39% from the prior-year quarter to $66.26 million. Net income attributable to UNTC and its per common share value came in at $55.82 million and $5.60 per share, which increased 786.7% and 918.2% year-over-year, respectively.
Shares of UNTC have gained 25% over the past six months to close the last trading session at $62.50. Moreover, it has gained 9.3% over the past month.
It is no surprise that UNTC has an overall B rating, which translates to Buy in our POWR Ratings system.
UNTC also has an A grade for Value, Momentum, and Quality. The stock is ranked #4 within the Energy – Oil & Gas industry.
Click here for additional ratings on Growth, Stability, and Sentiment for UNTC.
Want More Great Investing Ideas?
MPC shares were trading at $122.04 per share on Friday afternoon, up $1.03 (+0.85%). Year-to-date, MPC has gained 4.85%, versus a 4.13% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|MPC||Get Rating||Get Rating||Get Rating|
|BRY||Get Rating||Get Rating||Get Rating|
|UNTC||Get Rating||Get Rating||Get Rating|