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Time to Tap Oil Refiners' ETF Ahead of Earnings Season?
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U.S. oil refiners expect strong first-quarter earnings as margins to sell gasoline and diesel increased due to a decline in refining capacity and tight crude oil supplies because of Russia's war with Ukraine. While demand for oil is pretty strong now, the closure of several refineries in the past two years amid the coronavirus lockdown has boosted the oil prices.
Seven U.S. independent refining companies are projected to post earnings-per-share of 61 cents, compared with a loss of $1.32 in the first quarter of 2021, according to IBES data from Refinitiv, as quoted on a Reuters article. VanEck Oil Refiners ETF (CRAK - Free Report) is up 12.3% this year versus a 2.8% decline in the S&P 500. Let’s take a look at what lies ahead for the oil refiners’ ETF.
According to our methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) when combined with a positive Earnings ESP increases our chances of predicting an earnings beat, while companies with a Zacks Rank #4 or 5 (Sell rated) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Inside Our Surprise Prediction
Among the big companies, Marathon Oil (MRO - Free Report) is likely to report on May 4. MRO has a Zacks Rank #1 and an Earnings ESP of +1.73%.
Valero Energy (VLO - Free Report) is likely to report on Apr 26. VLO has a Zacks Rank #2 and an Earnings ESP of 0.00%.
Phillips 66 (PSX - Free Report) is likely to report on Apr 29. PSX has a Zacks Rank #3 and an Earnings ESP of 0.00%.
Delek US Holdings (DK - Free Report) is likely to report on May 3. DK has a Zacks Rank #2 and an Earnings ESP of 0.00%.
EnLink Midstream (ENLC - Free Report) is likely to report on May 3. ENLC has a Zacks Rank #2 and an Earnings ESP of 66.67%.
Murphy USA (MUSA - Free Report) is likely to report on May 3. MUSA has a Zacks Rank #2 and an Earnings ESP of 18.49%.
PBF Energy (PBF - Free Report) is likely to report on Apr 28. PBF has a Zacks Rank #1 and an Earnings ESP of 0.00%.
Outlook Looks Promising
As discussed above, chances of a broad-based earnings beat are higher, thanks to the better Rank and ESP profile. And why not? The 3-2-1 futures crack spread -- a measure of the profitability of turning crude into gasoline and diesel -- jumped to as much as $44.406 last Wednesday, “the highest level in records going back to 1986, exceeding the one-day blip in April 2020 when West Texas Intermediate futures briefly dipped below zero,” as quoted on Bloomberg.
Margins are at record levels as buyers are ready to pay high prices to keep the world mobile without the support of Russian fuel. The profitability outlook for refiners looks more promising as refiners prepare to boost diesel and jet fuel production, output of which is currently more profitable than gasoline, according to analysts and traders who spoke to Reuters’ Laura Sanicola, as quoted on oilprice.com.
Demand for U.S. gasoline and diesel is expected to exceed 2021 levels this summer by 1% and 2%, respectively, despite pump prices for both commodities increasing to their highest levels since 2014 after adjusting for inflation, according to a government forecast, as quoted on Bloomberg. Export demand from Latin America and Europe remains high as buyers are looking for alternatives to Russian fuel.
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Time to Tap Oil Refiners' ETF Ahead of Earnings Season?
U.S. oil refiners expect strong first-quarter earnings as margins to sell gasoline and diesel increased due to a decline in refining capacity and tight crude oil supplies because of Russia's war with Ukraine. While demand for oil is pretty strong now, the closure of several refineries in the past two years amid the coronavirus lockdown has boosted the oil prices.
Seven U.S. independent refining companies are projected to post earnings-per-share of 61 cents, compared with a loss of $1.32 in the first quarter of 2021, according to IBES data from Refinitiv, as quoted on a Reuters article. VanEck Oil Refiners ETF (CRAK - Free Report) is up 12.3% this year versus a 2.8% decline in the S&P 500. Let’s take a look at what lies ahead for the oil refiners’ ETF.
According to our methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) when combined with a positive Earnings ESP increases our chances of predicting an earnings beat, while companies with a Zacks Rank #4 or 5 (Sell rated) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Inside Our Surprise Prediction
Among the big companies, Marathon Oil (MRO - Free Report) is likely to report on May 4. MRO has a Zacks Rank #1 and an Earnings ESP of +1.73%.
Valero Energy (VLO - Free Report) is likely to report on Apr 26. VLO has a Zacks Rank #2 and an Earnings ESP of 0.00%.
Phillips 66 (PSX - Free Report) is likely to report on Apr 29. PSX has a Zacks Rank #3 and an Earnings ESP of 0.00%.
Delek US Holdings (DK - Free Report) is likely to report on May 3. DK has a Zacks Rank #2 and an Earnings ESP of 0.00%.
EnLink Midstream (ENLC - Free Report) is likely to report on May 3. ENLC has a Zacks Rank #2 and an Earnings ESP of 66.67%.
Murphy USA (MUSA - Free Report) is likely to report on May 3. MUSA has a Zacks Rank #2 and an Earnings ESP of 18.49%.
PBF Energy (PBF - Free Report) is likely to report on Apr 28. PBF has a Zacks Rank #1 and an Earnings ESP of 0.00%.
Outlook Looks Promising
As discussed above, chances of a broad-based earnings beat are higher, thanks to the better Rank and ESP profile. And why not? The 3-2-1 futures crack spread -- a measure of the profitability of turning crude into gasoline and diesel -- jumped to as much as $44.406 last Wednesday, “the highest level in records going back to 1986, exceeding the one-day blip in April 2020 when West Texas Intermediate futures briefly dipped below zero,” as quoted on Bloomberg.
Margins are at record levels as buyers are ready to pay high prices to keep the world mobile without the support of Russian fuel. The profitability outlook for refiners looks more promising as refiners prepare to boost diesel and jet fuel production, output of which is currently more profitable than gasoline, according to analysts and traders who spoke to Reuters’ Laura Sanicola, as quoted on oilprice.com.
Demand for U.S. gasoline and diesel is expected to exceed 2021 levels this summer by 1% and 2%, respectively, despite pump prices for both commodities increasing to their highest levels since 2014 after adjusting for inflation, according to a government forecast, as quoted on Bloomberg. Export demand from Latin America and Europe remains high as buyers are looking for alternatives to Russian fuel.