Last month was a mixed one for U.S. equities. The S&P 500 and the Dow were up 0.6% and 1.9%, respectively, but the tech-heavy Nasdaq Composite lost about 1.5%. In particular, the S&P 500 — regarded as one of the finest reflections of the stock market as a whole — not only rose for the fourth time in as many months but also notched an all-time closing high in May. The index’s decent run was driven by optimism around America’s faster economic recovery on the back of accelerated coronavirus vaccine rollouts, which offset concerns about rising inflation levels.  

Energy Was One of the Preferred Sectors

On the sectoral front, energy was third in the S&P standings for the month of May (behind Financials and Materials) with a gain of 4.19%. One of the major themes of the quarter was rising oil prices due to vaccine-related optimism and the OPEC+ cartel’s calibrated production policy, which had a direct bearing on the energy stocks. It then came as no surprise that stocks of oil-related companies were some of the biggest beneficiaries.

Of late, crude has found strong support at around $65 a barrel, with the U.S. benchmark hitting a multi-year high above $68 recently. Apart from successful vaccine rollouts and the OPEC+ cuts, the commodity’s upward momentum was supported by easing coronavirus infections in the United States and Europe, the passage of the $1.9-trillion stimulus bill, and signs of robust demand in the world’s second-largest oil consumer, China. In particular, much of the bullish argument is simply a bet on stronger economic growth in the Western markets and the subsequent improvement in consumer spending.

While most energy investors had something to cheer in May, some stocks certainly performed better than the others. The biggest winners were Baker Hughes (BKR Quick QuoteBKR - Free Report) , Schlumberger (SLB Quick QuoteSLB - Free Report) , TechnipFMC (FTI Quick QuoteFTI - Free Report) , Devon Energy (DVN Quick QuoteDVN - Free Report) and Marathon Petroleum (MPC Quick QuoteMPC - Free Report) .

Here's a brief summary of the five best-performing S&P 500 energy stocks of last month:

Baker Hughes: The company is one of the largest providers of technical products and services to drillers of oil and gas wells.

In the last reported quarter, Baker Hughes’ adjusted earnings per share came in at 12 cents, a penny above the Zacks Consensus Estimate. The company’s bottom line was favorably impacted by higher contributions from the Turbomachinery & Process Solutions business unit and increased cost productivity. On a further positive note, Baker Hughes recently entered into an offshore drilling joint venture with Norway’s Akastor ASA.

The Zacks Rank #3 (Hold) stock outperformed the other energy companies and was up 18.79% during the month. However, it remains to be seen if Baker Hughes could gain similar traction in the near-to-medium term. While the company looks poised to benefit from a series of profitable international liquefied natural gas (LNG) contracts, volatile commodity prices and the way it trades in the future could have a significant impact on the business of this oilfield service provider.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Schlumberger: Schlumberger is a well-diversified and well-managed oilfield service provider, involved in different activities. With broad, diverse and differentiated operations, the company has a presence in over 100 countries.

Schlumberger’s first-quarter bottom line came in above expectations, led by higher contributions from Latin America and several other countries as well as increased profitability from Asset Performance Solutions projects.

This Zacks Rank #3 stock jumped 12.62% in the past month. While Schlumberger appears well positioned with its global presence and greater reliance on lucrative international market, these positives are partially offset by revenue loss associated with the divestment of its OneStim onshore hydraulic fracturing business in the United States and Canada. Moreover, the North American drilling market is expected to witness tepid growth in the near to medium term.

TechnipFMC: It is a leading manufacturer and supplier of products, services and fully integrated technology solutions for the energy industry. In February, TechnipFMC completed the spin-off of its engineering and construction activities into a separate entity, Technip Energies, and transformed itself into a technology-focused equipment provider in the oil and gas space.

TechnipFMC reported first-quarter 2021 adjusted loss per share of 3 cents, narrower than the Zacks Consensus Estimate of a loss of 10 cents. The better-than-expected performance can be primarily attributed to higher-than-anticipated profits from the Subsea segment – the major contributor to the company’s top and bottom line.

The Zacks Rank #3 stock was the third-best sector performer in the S&P 500 Index, with shares appreciating 12.29% in May. Despite the company’s strong financial results and an attractive backlog of nearly $7 billion, the massive capital expenditure curtailments by the upstream players have created an extremely challenging operating environment for oilfield service operators like TechnipFMC.

Devon Energy: Devon is an independent energy company whose oil and gas operations are mainly concentrated in the onshore areas of North America, primarily in the United States. The company’s assets are spread across the key oil assets of Delaware Basin, Eagle Ford, Anadarko Basin and Powder River Basin.

In the last reported quarter, Devon Energy reported adjusted earnings of 45 cents, beating the Zacks Consensus Estimate of 35 cents per share by 28.6%. The outperformance reflects higher-than-expected production.

Devon, carrying a Zacks Rank #3, rallied 10.34% in May. The company’s recent merger with WPX Energy has strengthened its operations in the prolific Permian Basin. Devon’s cost management, divestiture of Canadian assets, and completion of the Barnett Shale gas assets sale will allow it to focus on its holdings in four high-quality, oil-rich U.S. basins. The company’s innovative dividend policy should also attract investors. However, the stock’s upside will be limited by product cost inflation and the volatility in oil/gas prices.  

Marathon Petroleum: It is a leading independent refiner, transporter and marketer of petroleum products.

Marathon Petroleum delivered better-than-expected first-quarter 2021 bottom-line performance. It reported adjusted loss of 20 cents per share, narrower than the Zacks Consensus Estimate of a loss of 72 cents. The company’s bottom line was favorably impacted by cost savings and stronger-than-expected performance from the Midstream segment.

The downstream operator, also carrying a Zacks Rank #3, saw its stock increase 10.28% last month. Marathon Petroleum recently completed the sale of its Speedway business for $21 billion that will provide the downstream operator with its much-needed cash infusion. Another positive aspect of the deal is a 15-year fuel supply agreement per which Marathon Petroleum will supply about 7.7 billion gallons of gasoline per year to 7-Eleven, thus ensuring a steady revenue stream. However, Marathon Petroleum has been bogged down by the coronavirus-induced oil products’ demand destruction.

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