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3 Top Refining & Marketing Picks on Strong Profit Margins
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The Zacks Oil and Gas - Refining & Marketing industryis gaining momentum as strong fuel demand and favorable refining margins boost earnings prospects. Refiners turn crude oil into gasoline, diesel and jet fuel, while many also operate pipelines, storage facilities and retail networks. These businesses can provide additional income when refining conditions change. The outlook remains encouraging. Industry earnings estimates for 2026 and 2027 have climbed sharply over the past year, and the group holds a top Zacks Industry Rank. Its shares have also outperformed both the broader energy sector and the S&P 500 over the past year. Strong cash generation and improved financial flexibility could support further investment and shareholder returns. Against this backdrop, three stocks stand out: Marathon Petroleum (MPC - Free Report) , PBF Energy (PBF - Free Report) and Phillips 66 (PSX - Free Report) , each offering exposure to favorable refining trends.
Industry Overview
The Zacks Oil and Gas - Refining & Marketing industry consists of companies involved in selling refined petroleum products (including heating oil, gasoline, jet fuel, residual oil, etc.) and a plethora of non-energy materials (like asphalt, road salt, clay and gypsum). Some companies operate refined product terminals, storage facilities and transportation services. The primary activity of these firms involves purchasing crude or other feedstocks and processing them into a wide variety of refined products. Refining margins are extremely volatile and generally reflect the state of petroleum product inventories, demand for refined products, imports, regional differences and capacity utilization in the industry. Other major determinants of refining profitability are the light/heavy and sweet/sour spreads. Refining companies are also prone to unplanned outages.
3 Trends Defining the Oil and Gas - Refining & Marketing Industry's Future
Strong Refining Margins Support Industry Prospects: The refining industry continues to benefit from favorable market conditions, with healthy demand for petroleum products supporting stronger profit margins. Refiners earn money from the difference between the cost of crude oil and the selling prices of finished fuels. When this gap widens, profitability generally improves. The current strength in refining margins has encouraged expectations of solid earnings through the remainder of 2026. Moreover, industry forecasts suggest that favorable conditions could extend into 2027. This outlook provides refiners with opportunities to generate higher profits, especially those capable of maintaining steady production and responding quickly to changing market conditions.
Strong Cash Generation Opens Doors for Shareholder Rewards: Improving financial flexibility is another encouraging development for the refining industry. Strong profits are allowing refiners to build cash reserves while reducing outstanding debt. Some industry participants are expected to move into a net cash position, where available cash exceeds borrowings. This could create greater opportunities to reward investors through share repurchases and dividends. Buying back shares can also support earnings per share by reducing the number of shares outstanding. With financial positions becoming healthier, refiners may have greater room to fund essential investments without taking on substantial additional debt. Such flexibility could strengthen investor confidence over time.
Diversified Operations Provide Additional Earnings Support: The refining and marketing industry benefits from business activities beyond converting crude oil into transportation fuels. Fuel retailing, pipelines, storage facilities and transportation services can provide additional income streams, helping reduce dependence on refining profits alone. Lubricants and specialty products also offer opportunities to serve different customer markets. Meanwhile, renewable diesel and sustainable aviation fuel businesses could enhance growth prospects as cleaner transportation fuels gain attention. A broader operating base can help refiners balance earnings across changing market conditions. This combination of traditional petroleum operations and related businesses could support more stable cash generation and improve long-term investment appeal.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Oil and Gas - Refining & Marketing is a 15-stock group within the broader Zacks Oil - Energy sector. The industry currently carries a Zacks Industry Rank #6, which places it in the top 2% of 247 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates strong near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of improving earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are becoming optimistic about this group’s earnings growth potential. As a matter of fact, while the industry’s earnings estimate for 2026 has gone up 253.5% in the past year, the same for 2027 has risen 208.2%.
Considering the encouraging dynamics of the industry, we will present a few stocks that you may want to consider for your portfolio. But it’s worth taking a look at the industry’s shareholder returns and current valuation first.
Industry Outperforms Sector & S&P 500
The Zacks Oil and Gas - Refining & Marketing industry has fared better than the broader Zacks Oil - Energy Sector as well as the Zacks S&P 500 composite over the past year.
The industry has gone up 133% over this period compared with the broader sector’s increase of 39.9%. Meanwhile, the S&P 500 has gained 11%.
One-Year Price Performance
Industry's Current Valuation
Since oil and gas companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) ratio. This is because the valuation metric takes into account not just equity but also the level of debt. For capital-intensive companies, EV/EBITDA is a better valuation metric because it is not influenced by changing capital structures and ignores the effect of noncash expenses.
On the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), the industry is currently trading at 6.38X, significantly lower than the S&P 500’s 17.65X. It is, however, slightly above the sector’s trailing 12-month EV/EBITDA of 6.29X.
Over the past five years, the industry has traded as high as 6.63X and as low as 1.53X, with a median of 3.43X, as the chart below shows.
Trailing 12-Month Enterprise Value-to-EBITDA (EV/EBITDA) Ratio (Past Five Years)
3 Stocks to Buy
Marathon Petroleum: Marathon Petroleum is a major U.S. refining and marketing company, processing crude oil into gasoline, diesel, jet fuel and other petroleum products. Its refineries operate across three key regions: the Gulf Coast, Mid-Continent and West Coast. The Zacks Rank #1 (Strong Buy) company benefits from access to different crude oil supplies, allowing it to choose cost-effective inputs and adjust fuel production according to market demand.
Beyond refining, Marathon operates an extensive distribution network supported by its midstream business, MPLX. This business provides pipelines, storage and other transportation services that help move crude oil and finished products efficiently. Marathon also produces renewable diesel and invests in improving refinery reliability and output.
The Zacks Consensus Estimate for 2026 earnings of MPC indicates 499.3% growth. It beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other, with the average being 49.3%. The company’s shares have soared 144.8% in a year.
Price and Consensus: MPC
PBF Energy: PBF Energy is a U.S. petroleum refiner that converts crude oil into gasoline, diesel, jet fuel and other transportation fuels. Its refining operations span the East Coast, Gulf Coast, Mid-Continent and West Coast, giving it access to several important fuel markets. The Zacks #1 Ranked company emphasizes flexible crude sourcing, helping its refineries manage changing oil prices and supply conditions.
Alongside refining, PBF manages fuel supply, trading and distribution activities to connect its production with customer demand. It is also involved in renewable diesel production through its investment in SBR. The company continues to improve refinery reliability, reduce energy consumption and control operating expenses to strengthen profitability across market cycles.
PBF Energy’s expected EPS growth rate for three to five years is currently 36.3%, which compares favorably with the industry's growth rate of 33.7%. The company beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed in the other, with the average being 123.4%. Shares of the company have gained 145.8% in a year.
Price and Consensus: PBF
Phillips 66: Phillips 66 is a diversified U.S. energy company with operations spanning refining, fuel marketing, transportation, chemicals and renewable fuels. Its refining network can process approximately 2 million barrels of crude oil daily, turning it into gasoline, diesel, jet fuel and other petroleum products. Phillips 66, carrying a Zacks Rank of 1, focuses on improving refinery efficiency, increasing production of higher-value fuels and reducing operating costs.
Its Marketing and Specialties business sells fuels through approximately 7,620 branded U.S. outlets, including Phillips 66, Conoco and 76 locations. The company's trading and transportation network helps secure affordable crude supplies and deliver finished products to profitable markets. Phillips 66’s integrated operations also support steady cash generation.
PSX has a market capitalization of approximately $113 billion. Phillips 66 beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, with the average being 62.6%. The Zacks Consensus Estimate for the company’s 2026 earnings per share indicates 387.4% year-over-year growth. Shares of PSX have gained 116.1% in a year.
View the Zacks #1 Rank List
Image: Bigstock
3 Top Refining & Marketing Picks on Strong Profit Margins
The Zacks Oil and Gas - Refining & Marketing industryis gaining momentum as strong fuel demand and favorable refining margins boost earnings prospects. Refiners turn crude oil into gasoline, diesel and jet fuel, while many also operate pipelines, storage facilities and retail networks. These businesses can provide additional income when refining conditions change. The outlook remains encouraging. Industry earnings estimates for 2026 and 2027 have climbed sharply over the past year, and the group holds a top Zacks Industry Rank. Its shares have also outperformed both the broader energy sector and the S&P 500 over the past year. Strong cash generation and improved financial flexibility could support further investment and shareholder returns. Against this backdrop, three stocks stand out: Marathon Petroleum (MPC - Free Report) , PBF Energy (PBF - Free Report) and Phillips 66 (PSX - Free Report) , each offering exposure to favorable refining trends.
Industry Overview
The Zacks Oil and Gas - Refining & Marketing industry consists of companies involved in selling refined petroleum products (including heating oil, gasoline, jet fuel, residual oil, etc.) and a plethora of non-energy materials (like asphalt, road salt, clay and gypsum). Some companies operate refined product terminals, storage facilities and transportation services. The primary activity of these firms involves purchasing crude or other feedstocks and processing them into a wide variety of refined products. Refining margins are extremely volatile and generally reflect the state of petroleum product inventories, demand for refined products, imports, regional differences and capacity utilization in the industry. Other major determinants of refining profitability are the light/heavy and sweet/sour spreads. Refining companies are also prone to unplanned outages.
3 Trends Defining the Oil and Gas - Refining & Marketing Industry's Future
Strong Refining Margins Support Industry Prospects: The refining industry continues to benefit from favorable market conditions, with healthy demand for petroleum products supporting stronger profit margins. Refiners earn money from the difference between the cost of crude oil and the selling prices of finished fuels. When this gap widens, profitability generally improves. The current strength in refining margins has encouraged expectations of solid earnings through the remainder of 2026. Moreover, industry forecasts suggest that favorable conditions could extend into 2027. This outlook provides refiners with opportunities to generate higher profits, especially those capable of maintaining steady production and responding quickly to changing market conditions.
Strong Cash Generation Opens Doors for Shareholder Rewards: Improving financial flexibility is another encouraging development for the refining industry. Strong profits are allowing refiners to build cash reserves while reducing outstanding debt. Some industry participants are expected to move into a net cash position, where available cash exceeds borrowings. This could create greater opportunities to reward investors through share repurchases and dividends. Buying back shares can also support earnings per share by reducing the number of shares outstanding. With financial positions becoming healthier, refiners may have greater room to fund essential investments without taking on substantial additional debt. Such flexibility could strengthen investor confidence over time.
Diversified Operations Provide Additional Earnings Support: The refining and marketing industry benefits from business activities beyond converting crude oil into transportation fuels. Fuel retailing, pipelines, storage facilities and transportation services can provide additional income streams, helping reduce dependence on refining profits alone. Lubricants and specialty products also offer opportunities to serve different customer markets. Meanwhile, renewable diesel and sustainable aviation fuel businesses could enhance growth prospects as cleaner transportation fuels gain attention. A broader operating base can help refiners balance earnings across changing market conditions. This combination of traditional petroleum operations and related businesses could support more stable cash generation and improve long-term investment appeal.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Oil and Gas - Refining & Marketing is a 15-stock group within the broader Zacks Oil - Energy sector. The industry currently carries a Zacks Industry Rank #6, which places it in the top 2% of 247 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates strong near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of improving earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are becoming optimistic about this group’s earnings growth potential. As a matter of fact, while the industry’s earnings estimate for 2026 has gone up 253.5% in the past year, the same for 2027 has risen 208.2%.
Considering the encouraging dynamics of the industry, we will present a few stocks that you may want to consider for your portfolio. But it’s worth taking a look at the industry’s shareholder returns and current valuation first.
Industry Outperforms Sector & S&P 500
The Zacks Oil and Gas - Refining & Marketing industry has fared better than the broader Zacks Oil - Energy Sector as well as the Zacks S&P 500 composite over the past year.
The industry has gone up 133% over this period compared with the broader sector’s increase of 39.9%. Meanwhile, the S&P 500 has gained 11%.
One-Year Price Performance
Industry's Current Valuation
Since oil and gas companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) ratio. This is because the valuation metric takes into account not just equity but also the level of debt. For capital-intensive companies, EV/EBITDA is a better valuation metric because it is not influenced by changing capital structures and ignores the effect of noncash expenses.
On the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), the industry is currently trading at 6.38X, significantly lower than the S&P 500’s 17.65X. It is, however, slightly above the sector’s trailing 12-month EV/EBITDA of 6.29X.
Over the past five years, the industry has traded as high as 6.63X and as low as 1.53X, with a median of 3.43X, as the chart below shows.
Trailing 12-Month Enterprise Value-to-EBITDA (EV/EBITDA) Ratio (Past Five Years)
3 Stocks to Buy
Marathon Petroleum: Marathon Petroleum is a major U.S. refining and marketing company, processing crude oil into gasoline, diesel, jet fuel and other petroleum products. Its refineries operate across three key regions: the Gulf Coast, Mid-Continent and West Coast. The Zacks Rank #1 (Strong Buy) company benefits from access to different crude oil supplies, allowing it to choose cost-effective inputs and adjust fuel production according to market demand.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Beyond refining, Marathon operates an extensive distribution network supported by its midstream business, MPLX. This business provides pipelines, storage and other transportation services that help move crude oil and finished products efficiently. Marathon also produces renewable diesel and invests in improving refinery reliability and output.
The Zacks Consensus Estimate for 2026 earnings of MPC indicates 499.3% growth. It beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other, with the average being 49.3%. The company’s shares have soared 144.8% in a year.
Price and Consensus: MPC
PBF Energy: PBF Energy is a U.S. petroleum refiner that converts crude oil into gasoline, diesel, jet fuel and other transportation fuels. Its refining operations span the East Coast, Gulf Coast, Mid-Continent and West Coast, giving it access to several important fuel markets. The Zacks #1 Ranked company emphasizes flexible crude sourcing, helping its refineries manage changing oil prices and supply conditions.
Alongside refining, PBF manages fuel supply, trading and distribution activities to connect its production with customer demand. It is also involved in renewable diesel production through its investment in SBR. The company continues to improve refinery reliability, reduce energy consumption and control operating expenses to strengthen profitability across market cycles.
PBF Energy’s expected EPS growth rate for three to five years is currently 36.3%, which compares favorably with the industry's growth rate of 33.7%. The company beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed in the other, with the average being 123.4%. Shares of the company have gained 145.8% in a year.
Price and Consensus: PBF
Phillips 66: Phillips 66 is a diversified U.S. energy company with operations spanning refining, fuel marketing, transportation, chemicals and renewable fuels. Its refining network can process approximately 2 million barrels of crude oil daily, turning it into gasoline, diesel, jet fuel and other petroleum products. Phillips 66, carrying a Zacks Rank of 1, focuses on improving refinery efficiency, increasing production of higher-value fuels and reducing operating costs.
Its Marketing and Specialties business sells fuels through approximately 7,620 branded U.S. outlets, including Phillips 66, Conoco and 76 locations. The company's trading and transportation network helps secure affordable crude supplies and deliver finished products to profitable markets. Phillips 66’s integrated operations also support steady cash generation.
PSX has a market capitalization of approximately $113 billion. Phillips 66 beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, with the average being 62.6%. The Zacks Consensus Estimate for the company’s 2026 earnings per share indicates 387.4% year-over-year growth. Shares of PSX have gained 116.1% in a year.
Price and Consensus: PSX