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Top 5 Picks From S&P 500's Best-Performing Sector Year to Date
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U.S. stock markets have seen extreme volatility so far in 2022. All major large-cap, mid-cap and small-cap-centric stocks indexes have plummeted year to date. Most of the sectors are suffering from soaring inflationary pressure, global supply-chain disruptions and a higher interest rate regime. A notable exception is the energy sector, especially the crude oil industry. This sector continues to thrive this year after an impressive 2021.
The sector is likely to maintain its momentum in the near term, buoyed by several positives discussed below. At this stage, it will be prudent to invest in oil giants with a favorable Zacks Rank. We have selected five such stocks that have skyrocketed in 2022 so far with more upside left. These companies are — Exxon Mobil Corp. (XOM - Free Report) , Chevron Corp. (CVX - Free Report) , Marathon Petroleum Corp. (MPC - Free Report) , Valero Energy Corp. (VLO - Free Report) and Coterra Energy Inc. (CTRA - Free Report) .
Energy Sector Flourishes
Despite severe volatility, the oil and energy sector has flourished so far this year. This sector suffered a bloody blow in 2020 as the global outbreak of coronavirus forced the whole world to impose lockdowns, especially travel restrictions. As a result, oil prices plunged to historic low levels.
However, the situation started taking a positive turn once the global economies, especially the United States, started reopening. The nationwide deployment of COVID-19 vaccines resulted in a faster-than-expected reopening. Strong demand for crude oil — as travel restrictions were removed — resulted in soaring oil prices.
The decision by OPEC to maintain the production quota also resulted in a demand-supply imbalance resulting in the northbound movement of oil price. Moreover, the month-long geopolitical conflict between Russia and Ukraine pushed oil prices to a two-year high.
Although oil prices are currently below $90 per barrel, a large section of analysts is expecting consumers to switch from gas to oil this winter because of price pressure. Per the latest government data, crude inventories in the United States rose for the second week in a row, boosted by the ongoing releases from the Strategic Petroleum Reserve.
A possible rail strike in the United States due to ongoing labor disputes might be another factor contributing to oil prices going up. Additionally, almost all countries have removed pandemic-led restrictions for travel, office work, shopping mall visits, watching sports and entertainment programs on grounds or theaters and socializing. Consequently, the demand for gasoline, diesel fuel and jet fuel will increase.
The Energy Select Sector, one of the 11 broad sectors of the benchmark S&P 500 Index, has appreciated 48.2% year over year. Except the Utilities (up 7.1%), all other sectors are trading in deep in red so far in 2022. The S&P 500 Index itself is down 17.2% year to date. Notably, in 2021, the Energy Sector had jumped 53.3% and became the best performer.
Our Top Picks
We have narrowed our search to five oil bigwigs that have popped more than 30% year to date. These stocks have strong growth ;potential for the rest of 2022 and have seen positive earnings estimate revisions in the past 30 days. These companies are regular dividend payers too. Finally, each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
Exxon Mobil’s bellwether status and an optimal integrated capital structure, which have historically led to industry-leading returns, make it a relatively lower-risk energy sector play. The integrated oil giant expects to reduce greenhouse gas emissions by 30% in its upstream business.
At the same time, XOM expects to reduce flaring and methane emissions by 40%. With the reopening of the global economy, crude oil prices are likely to remain high despite near-term growth concerns.
Exxon Mobil has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the past 30 days. The stock price of XOM has jumped 59.6% year to date. It has a current dividend yield of 3.7%.
Chevron is one of the best-placed global integrated oil firms to achieve a sustainable production ramp-up. CVX’s existing project pipeline is one of the best in the industry, thanks to its premier position in the lucrative Permian Basin. The WTI crude oil price is hovering around $100 per barrel. The price is likely to remain elevated as the Russia-Ukraine conflict is yet to be resolved.
Chevron’s Noble Energy takeover has expanded its footprint in the region and the DJ Basin. CVX now has access to Noble Energy’s low-cost, proven reserves along with cash-generating offshore assets in Israel — particularly the flagship Leviathan natural gas project — thereby boosting its footing in the Mediterranean.
CVX has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the past seven days. The stock price of CVX has advanced 39.1% year to date. It has a current dividend yield of 3.6%.
Marathon Petroleum is poised for further price gains based on a slew of positives. MPC’s $21 billion sales of its Speedway retail business provided it with a much-needed cash infusion. The deal also comes with a 15-year fuel supply agreement under which Marathon Petroleum will supply 7.7 billion gallons of gasoline per year to 7-Eleven, thus ensuring a steady revenue stream.
MPC’s exposure to more stable cash flows from the logistics segment diversifies the earnings stream and offers a buffer against the volatile refining business. Consequently, Marathon Petroleum is primed for significant capital appreciation and is viewed as a preferred downstream operator to own now.
Marathon Petroleum has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the past seven days. The stock price of MPC has climbed 53.7% year to date. It has a current dividend yield of 2.4%.
Valero Energy is the largest independent refiner and marketer of petroleum products in the United States. VLO offers the most diversified refinery base with a capacity of 3.2 million barrels per day in its 15 refineries throughout the United States, Canada and the Caribbean.
The majority of Valero Energy’s refining plants are situated in the Gulf coast area from where there is easy access to the export facilities. VLO’s Gulf coast presence helped it to expand export volumes over the past years and gain from high distillate margins.
Moreover, Valero Energy intends to quadruple renewable diesel production capacity by 2023. With low-carbon fuel policies being adopted by economies around the globe, the demand for renewable fuel is expected to rise in the coming days. Also, VLO is expected to capitalize on the increasing demand for distillate fuel.
Valero Energy has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3% over the past seven days. The stock price of VLO has surged 45.9% year to date. It has a current dividend yield of 3.5%.
Coterra Energy is engaged in the development, exploration and production of oil, natural gas, and natural gas liquids in the United States. CTRA primarily focuses on the Marcellus Shale with approximately 177,000 net acres in the dry gas window of the play located in Susquehanna County, PA.
Coterra Energy also holds Permian Basin properties with approximately 306,000 net acres; and Anadarko Basin properties located in Oklahoma with approximately 182,000 net acres. In addition, CTRA operates natural gas and saltwater disposal gathering systems in Texas.
Coterra Energy has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the past seven days. The stock price of CTRA has soared 69.6% year to date. It has a current dividend yield of 2%.
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Top 5 Picks From S&P 500's Best-Performing Sector Year to Date
U.S. stock markets have seen extreme volatility so far in 2022. All major large-cap, mid-cap and small-cap-centric stocks indexes have plummeted year to date. Most of the sectors are suffering from soaring inflationary pressure, global supply-chain disruptions and a higher interest rate regime. A notable exception is the energy sector, especially the crude oil industry. This sector continues to thrive this year after an impressive 2021.
The sector is likely to maintain its momentum in the near term, buoyed by several positives discussed below. At this stage, it will be prudent to invest in oil giants with a favorable Zacks Rank. We have selected five such stocks that have skyrocketed in 2022 so far with more upside left. These companies are — Exxon Mobil Corp. (XOM - Free Report) , Chevron Corp. (CVX - Free Report) , Marathon Petroleum Corp. (MPC - Free Report) , Valero Energy Corp. (VLO - Free Report) and Coterra Energy Inc. (CTRA - Free Report) .
Energy Sector Flourishes
Despite severe volatility, the oil and energy sector has flourished so far this year. This sector suffered a bloody blow in 2020 as the global outbreak of coronavirus forced the whole world to impose lockdowns, especially travel restrictions. As a result, oil prices plunged to historic low levels.
However, the situation started taking a positive turn once the global economies, especially the United States, started reopening. The nationwide deployment of COVID-19 vaccines resulted in a faster-than-expected reopening. Strong demand for crude oil — as travel restrictions were removed — resulted in soaring oil prices.
The decision by OPEC to maintain the production quota also resulted in a demand-supply imbalance resulting in the northbound movement of oil price. Moreover, the month-long geopolitical conflict between Russia and Ukraine pushed oil prices to a two-year high.
Although oil prices are currently below $90 per barrel, a large section of analysts is expecting consumers to switch from gas to oil this winter because of price pressure. Per the latest government data, crude inventories in the United States rose for the second week in a row, boosted by the ongoing releases from the Strategic Petroleum Reserve.
A possible rail strike in the United States due to ongoing labor disputes might be another factor contributing to oil prices going up. Additionally, almost all countries have removed pandemic-led restrictions for travel, office work, shopping mall visits, watching sports and entertainment programs on grounds or theaters and socializing. Consequently, the demand for gasoline, diesel fuel and jet fuel will increase.
The Energy Select Sector, one of the 11 broad sectors of the benchmark S&P 500 Index, has appreciated 48.2% year over year. Except the Utilities (up 7.1%), all other sectors are trading in deep in red so far in 2022. The S&P 500 Index itself is down 17.2% year to date. Notably, in 2021, the Energy Sector had jumped 53.3% and became the best performer.
Our Top Picks
We have narrowed our search to five oil bigwigs that have popped more than 30% year to date. These stocks have strong growth ;potential for the rest of 2022 and have seen positive earnings estimate revisions in the past 30 days. These companies are regular dividend payers too. Finally, each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
Exxon Mobil’s bellwether status and an optimal integrated capital structure, which have historically led to industry-leading returns, make it a relatively lower-risk energy sector play. The integrated oil giant expects to reduce greenhouse gas emissions by 30% in its upstream business.
At the same time, XOM expects to reduce flaring and methane emissions by 40%. With the reopening of the global economy, crude oil prices are likely to remain high despite near-term growth concerns.
Exxon Mobil has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the past 30 days. The stock price of XOM has jumped 59.6% year to date. It has a current dividend yield of 3.7%.
Chevron is one of the best-placed global integrated oil firms to achieve a sustainable production ramp-up. CVX’s existing project pipeline is one of the best in the industry, thanks to its premier position in the lucrative Permian Basin. The WTI crude oil price is hovering around $100 per barrel. The price is likely to remain elevated as the Russia-Ukraine conflict is yet to be resolved.
Chevron’s Noble Energy takeover has expanded its footprint in the region and the DJ Basin. CVX now has access to Noble Energy’s low-cost, proven reserves along with cash-generating offshore assets in Israel — particularly the flagship Leviathan natural gas project — thereby boosting its footing in the Mediterranean.
CVX has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the past seven days. The stock price of CVX has advanced 39.1% year to date. It has a current dividend yield of 3.6%.
Marathon Petroleum is poised for further price gains based on a slew of positives. MPC’s $21 billion sales of its Speedway retail business provided it with a much-needed cash infusion. The deal also comes with a 15-year fuel supply agreement under which Marathon Petroleum will supply 7.7 billion gallons of gasoline per year to 7-Eleven, thus ensuring a steady revenue stream.
MPC’s exposure to more stable cash flows from the logistics segment diversifies the earnings stream and offers a buffer against the volatile refining business. Consequently, Marathon Petroleum is primed for significant capital appreciation and is viewed as a preferred downstream operator to own now.
Marathon Petroleum has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the past seven days. The stock price of MPC has climbed 53.7% year to date. It has a current dividend yield of 2.4%.
Valero Energy is the largest independent refiner and marketer of petroleum products in the United States. VLO offers the most diversified refinery base with a capacity of 3.2 million barrels per day in its 15 refineries throughout the United States, Canada and the Caribbean.
The majority of Valero Energy’s refining plants are situated in the Gulf coast area from where there is easy access to the export facilities. VLO’s Gulf coast presence helped it to expand export volumes over the past years and gain from high distillate margins.
Moreover, Valero Energy intends to quadruple renewable diesel production capacity by 2023. With low-carbon fuel policies being adopted by economies around the globe, the demand for renewable fuel is expected to rise in the coming days. Also, VLO is expected to capitalize on the increasing demand for distillate fuel.
Valero Energy has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3% over the past seven days. The stock price of VLO has surged 45.9% year to date. It has a current dividend yield of 3.5%.
Coterra Energy is engaged in the development, exploration and production of oil, natural gas, and natural gas liquids in the United States. CTRA primarily focuses on the Marcellus Shale with approximately 177,000 net acres in the dry gas window of the play located in Susquehanna County, PA.
Coterra Energy also holds Permian Basin properties with approximately 306,000 net acres; and Anadarko Basin properties located in Oklahoma with approximately 182,000 net acres. In addition, CTRA operates natural gas and saltwater disposal gathering systems in Texas.
Coterra Energy has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the past seven days. The stock price of CTRA has soared 69.6% year to date. It has a current dividend yield of 2%.