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5 Sell-Ranked Energy Stocks with Declining Estimates to Avoid
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Despite President Trump’s pro oil policies and OPEC’s efforts to rejuvenate the oil industry, the energy sector’s bumpy ride continues. Though oil prices have recovered from their historical lows, prices still remain low. Commodity’s woes continue as prices linger around $50 per barrel.
While OPEC and other major producers’ have been taking efforts to help crude prices improve, increase in North American shale output continues to be a laggard. OPEC's efforts to trim output and achieve a balance in demand and supply have stabilized the market to a large extent. However, in the process it has also enabled shale drillers to reap greater produce.
With production remaining strong and commodity demand lagging supply, the oil industry’s prospects are dependent on the conflicts arising from OPEC-driven output cuts and increased U.S. shale production. Per Energy Information Administration’s (EIA) latest inventory release, U.S. production rose to 9.5 million barrels a day — the highest in the last two years. This was prior to the drop in U.S. Gulf of Mexico oil volumes due to Hurricane Harvey.
Harvey led to the shutdown of various refineries. This led to the refinery utilization falling to the lowest levels since 2010. It has also reduced the demand for crude which translated into low oil prices. However, with refineries gearing up to resume operations, oil prices are expected to move up gradually.
Nevertheless, volatility of commodity prices along with the rising shale production are likely to delay the recovery process of the market. Oil/Energy ranks 15 among the 16 broad Zacks sectors within the Zacks Industry classification. Year to date, the Zacks Oil-Energy sector has declined by almost 10% against the S&P 500 market’s growth of more than 11%.
Thus, given the uncertain prospects of the industry, it will be wise for investors to reshuffle their portfolio and get rid of stocks that may dent returns.
How to Identify Underperforming Stocks?
Getting rid of underperforming stocks at the right time helps maximize portfolio returns. Selecting stocks to dump could be a bit tricky as there are so many to be avoided. However, with the assistance of our Zacks Stock Screener, one can locate stocks with a red flag.
One could begin by selecting stocks that have lost more than 5% year to date. Further, stocks that witnessed negative estimate revisions over the last 60 days) for the current year are likely to plunge more and should be dumped.
Under no circumstance should one buy a stock with a Zacks Rank #4 (Sell) or #5 (Strong Sell) and a low VGM Score of D or F.
5 Stocks to Dump
Buckeye Partners, L.P. : This Houston-based midstream unit is engaged in the transportation and storage of liquid petroleum products. The pipeline operator currently carries a Zacks Rank #5 and has a VGM Score of F. Further, over the last 60 days, the Zacks Consensus Estimate has decreased 12.7% for 2017 earnings. Units of the company have declined more than 14% year to date. Struggling with less favorable business conditions and decline in marine terminal capacity utilization, the partnership has reported average negative earnings surprise of 9.07% in the trailing four quarters.
NuStar Energy L.P. (NS - Free Report) : This San Antonio-based master limited partnership operates through three segments — Pipeline, Storage and Fuels Marketing. The partnership presently carries a Zacks Rank #5 and has a VGM Score of F. Further, the Zacks Consensus Estimate for 2017 earnings has moved downward by 32.4% over the last 60 days. Further the stock has lost more than 16.5% year to date. NuStar has reported average negative earnings surprise of 62.01% in the trailing four quarters due to the oil slump which has adversely impacted demand for transportation and storage services.
Evolution Petroleum Corporation (EPM - Free Report) : Headquartered in Houston, this upstream player is engaged in the acquisition and production of crude oil and natural gas. The company currently carries a Zacks Rank #4, has a VGM Score of D. The stock has declined 31% year to date. Moreover, the company’s Zacks Consensus Estimate for 2017 earnings has moved south by 7.6% over the last 60 days. Hit by crude's historic decline Evolution Petroleum has reported average negative earnings surprise of 5.27% in the trailing four quarters.
Gastar Exploration Inc. : This Houston-based upstream company is mainly focused on the production of natural gas. The company presently carries a Zacks Rank #5 and has a VGM Score of F. Further, over the past 60 days, the Zacks Consensus Estimate of loss has been widened by 21.4% for 2017, raising further pessimism on the stock. The stock has declined more than 58% year to date on debt woes, declining liquidity and negative cash flows. The company reported average negative earnings surprise of 25.24% in the trailing four quarters.
Approach Resources Inc. : This Fort Worth, TX-based company is focused on the exploration and production of unconventional oil and gas reserves in the United States. The upstream player currently carries a Zacks Rank #4 and has a VGM score of D. Moreover, over the last 60 days, the Zacks Consensus Estimate for loss has widened by 17.1% for 2017 earnings. The company which has declined more than 18% year to date is facing immense pressure due to the weak commodity market and is grappling with liquidity problems. Approach Resources has delivered average negative earnings surprise of 19.22% in the trailing four quarters
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5 Sell-Ranked Energy Stocks with Declining Estimates to Avoid
Despite President Trump’s pro oil policies and OPEC’s efforts to rejuvenate the oil industry, the energy sector’s bumpy ride continues. Though oil prices have recovered from their historical lows, prices still remain low. Commodity’s woes continue as prices linger around $50 per barrel.
While OPEC and other major producers’ have been taking efforts to help crude prices improve, increase in North American shale output continues to be a laggard. OPEC's efforts to trim output and achieve a balance in demand and supply have stabilized the market to a large extent. However, in the process it has also enabled shale drillers to reap greater produce.
With production remaining strong and commodity demand lagging supply, the oil industry’s prospects are dependent on the conflicts arising from OPEC-driven output cuts and increased U.S. shale production. Per Energy Information Administration’s (EIA) latest inventory release, U.S. production rose to 9.5 million barrels a day — the highest in the last two years. This was prior to the drop in U.S. Gulf of Mexico oil volumes due to Hurricane Harvey.
Harvey led to the shutdown of various refineries. This led to the refinery utilization falling to the lowest levels since 2010. It has also reduced the demand for crude which translated into low oil prices. However, with refineries gearing up to resume operations, oil prices are expected to move up gradually.
Nevertheless, volatility of commodity prices along with the rising shale production are likely to delay the recovery process of the market. Oil/Energy ranks 15 among the 16 broad Zacks sectors within the Zacks Industry classification. Year to date, the Zacks Oil-Energy sector has declined by almost 10% against the S&P 500 market’s growth of more than 11%.
Thus, given the uncertain prospects of the industry, it will be wise for investors to reshuffle their portfolio and get rid of stocks that may dent returns.
How to Identify Underperforming Stocks?
Getting rid of underperforming stocks at the right time helps maximize portfolio returns. Selecting stocks to dump could be a bit tricky as there are so many to be avoided. However, with the assistance of our Zacks Stock Screener, one can locate stocks with a red flag.
One could begin by selecting stocks that have lost more than 5% year to date. Further, stocks that witnessed negative estimate revisions over the last 60 days) for the current year are likely to plunge more and should be dumped.
Under no circumstance should one buy a stock with a Zacks Rank #4 (Sell) or #5 (Strong Sell) and a low VGM Score of D or F.
5 Stocks to Dump
Buckeye Partners, L.P. : This Houston-based midstream unit is engaged in the transportation and storage of liquid petroleum products. The pipeline operator currently carries a Zacks Rank #5 and has a VGM Score of F. Further, over the last 60 days, the Zacks Consensus Estimate has decreased 12.7% for 2017 earnings. Units of the company have declined more than 14% year to date. Struggling with less favorable business conditions and decline in marine terminal capacity utilization, the partnership has reported average negative earnings surprise of 9.07% in the trailing four quarters.
Buckeye Partners L.P. Price
Buckeye Partners L.P. Price | Buckeye Partners L.P. Quote
NuStar Energy L.P. (NS - Free Report) : This San Antonio-based master limited partnership operates through three segments — Pipeline, Storage and Fuels Marketing. The partnership presently carries a Zacks Rank #5 and has a VGM Score of F. Further, the Zacks Consensus Estimate for 2017 earnings has moved downward by 32.4% over the last 60 days. Further the stock has lost more than 16.5% year to date. NuStar has reported average negative earnings surprise of 62.01% in the trailing four quarters due to the oil slump which has adversely impacted demand for transportation and storage services.
Nustar Energy L.P. Price
Nustar Energy L.P. Price | Nustar Energy L.P. Quote
Evolution Petroleum Corporation (EPM - Free Report) : Headquartered in Houston, this upstream player is engaged in the acquisition and production of crude oil and natural gas. The company currently carries a Zacks Rank #4, has a VGM Score of D. The stock has declined 31% year to date. Moreover, the company’s Zacks Consensus Estimate for 2017 earnings has moved south by 7.6% over the last 60 days. Hit by crude's historic decline Evolution Petroleum has reported average negative earnings surprise of 5.27% in the trailing four quarters.
Evolution Petroleum Corporation, Inc. Price
Evolution Petroleum Corporation, Inc. Price | Evolution Petroleum Corporation, Inc. Quote
Gastar Exploration Inc. : This Houston-based upstream company is mainly focused on the production of natural gas. The company presently carries a Zacks Rank #5 and has a VGM Score of F. Further, over the past 60 days, the Zacks Consensus Estimate of loss has been widened by 21.4% for 2017, raising further pessimism on the stock. The stock has declined more than 58% year to date on debt woes, declining liquidity and negative cash flows. The company reported average negative earnings surprise of 25.24% in the trailing four quarters.
Gastar Exploration Inc. Price
Gastar Exploration Inc. Price | Gastar Exploration Inc. Quote
Approach Resources Inc. : This Fort Worth, TX-based company is focused on the exploration and production of unconventional oil and gas reserves in the United States. The upstream player currently carries a Zacks Rank #4 and has a VGM score of D. Moreover, over the last 60 days, the Zacks Consensus Estimate for loss has widened by 17.1% for 2017 earnings. The company which has declined more than 18% year to date is facing immense pressure due to the weak commodity market and is grappling with liquidity problems. Approach Resources has delivered average negative earnings surprise of 19.22% in the trailing four quarters
Approach Resources Inc. Price
Approach Resources Inc. Price | Approach Resources Inc. Quote
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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