I very rarely see an industry with a clean slate -- nothing but analyst upgrades.
That is the case for the U.S. Integrated Oil Industry. This is a Zacks Industry niche with big U.S. names most retail investors look into, or own already.
In the 6-company-strong industry, there have been 16 recent EPS upgrades across the space and 0 downgrades. If that doesn’t sound bullish, nothing does. This gave the U.S. Integrated Oil Industry a Zacks Industry Rank of #15 out of 265, raising an astonishing +85 slots in the last week alone.
Note: All three top Zacks-ranked players I focused on in the space spun off their refining operations in 2011-12. These 3 companies are now tightly focused on Exploration and Production (E&P). In the trade, they are known as ‘pure plays.’
As for the much bigger 76-company-strong E&P industry in the Zacks Industry ranks? It is at #7 out of 265 right now. The broader E&P industry records 184 analyst EPS upgrades in our ranking system and has just 35 downgrades.
That speaks for itself, too.
The point of all of this -- the S&P 500 Energy sector has been leading the EPS revisions downward for 18 months or more. That EPS pessimism is now officially over.
Deeply discounted E&P shares have already bounced from these belated upgrades, as oil prices got up towards and past $50 a barrel again. I can’t see the future better than the analysts. But I can see their herding behavior.
My call? All analyst upgrade information I am presenting to you is already priced in! It is too broad a trend to have been ignored.
However, those who wish to follow these stocks closely may find a valuable entry point sometime later this year.
Here are 3 stocks to consider--
(1) Conoco Phillips (COP - Analyst Report) is a Zacks #2 (BUY) ranked stock.
After hitting a low of $33 a share this year, the stock has bounced to $44 a share. It traded at $65 to $70 a share in 2014, before the 18-month oil price collapse.
ConocoPhillips is a major global exploration and production (E&P) company with operations all over the world.
As year-end 2014, the company had estimated proved reserves of 8.9 billion oil-equivalent barrels (BOE). Production from continuing operations, excluding Libya, averaged 1,532 thousand barrels of oil equivalent per day (MBOED) in 2014.
In May 2012, ConocoPhillips completed the spin-off of its refining/sales business into a separate, independent and publicly traded company, Phillips 66 (PSX).
(2) Hess Corp. (HES - Analyst Report) is a Zacks #2 (BUY) ranked stock.
After hitting a low of $38 a share this year, the stock has bounced to $58 a share. It traded at $76 and surged towards $100 a share late in 2014 before the oil price collapse.
New York-based Hess Corporation, previously known as Amerada Hess, is a global exploration and production company that develops, produces, purchases, transports and sells crude oil and natural gas.
The company's E&P activities are concentrated in Algeria, Australia, Azerbaijan, Brazil, Denmark, Egypt, Equatorial Guinea, Gabon, Ghana, Indonesia, Libya, Malaysia, Norway, Russia, Thailand, the United Kingdom and the United States.
As of year-end 2014, Hess' proved reserves tally stood at 1.43 billion oil-equivalent barrels. In 2013, Hess sold its gas stations and exited the refining business to operate as a pure play E&P.
(3) Marathon Oil Corp. (MRO - Analyst Report) ) is a Zacks #2 (BUY) ranked stock.
Marathon Oil Corporation is a leading exploration and production company with extensive operations across four core regions: Africa, Middle East, Europe and North America.
After hitting a low of $7 share earlier this year, the stock has bounced to $15 a share. That is a doubling in price off the lows. The shares traded at $35 a share before the oil price collapse.
As of year-end 2014, Marathon had approximately 2.2 billion oil-equivalent barrels (BBOE) in proved reserves (80% liquids and 67% developed). The company's business is organized into three segments -- North America Exploration and Production, International Exploration and Production, and Oil Sands Mining.
In July 2011, Marathon completed the spin-off of its refining/sales business into a separate, independent and publicly traded company Marathon Petroleum Corporation (MPC).