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4 Energy Stocks That Escaped the Sector Shortfall in 2023
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The year 2023 has witnessed an impressive rally on Wall Street, propelled by a consistent decline in inflation and a simultaneous moderation in both the scale and frequency of interest rate hikes by the Federal Reserve. Illustrating this trend, the S&P 500 has surged 22.4% year to date to come within a whisker of its all-time highs.
While the market continues to be largely bullish, the Oil/Energy sector has been engulfed in a downtrend. Against this backdrop, it will be fruitful to invest in top-ranked companies that have defied the sector’s lackluster performance this year.
Complementing the diminishing inflation, the U.S. economy's fundamentals remain robust. With a staggering 5.1% growth in GDP during the third quarter of 2023 and resilient consumer spending, the economic landscape looks promising. Additionally, signals from the central bank suggest an approaching conclusion to the current rate hike cycle. The anticipation of lower market interest rates is expected to lower the cost of funds, providing companies with opportunities to initiate projects and boost capital expenditure.
Energy: One of the Few S&P 500 Laggards
While the S&P 500 equity index has been on a tear, it has been a wild ride for the energy market in 2023, setting pulses racing of even the steadiest investors. In fact, Oil/Energy has been one of the worst-performing sectors. The space has witnessed a total return of (3.5%) so far this year against the S&P 500’s gain of more than 22%.
At around $74 per barrel, crude prices are some 20% lower than the 2023 highs reached in late September, primarily due to global economic uncertainties, expanding production capabilities outside OPEC, and abundant inventories. China's economic struggles further dampen global demand forecasts. Meanwhile, natural gas is trading below $3 on high production and predictions of insipid weather-related demand.
A Handful of Companies Defied the Downturn
Even amid a volatile, declining market, some companies have stood firm, indicating investors’ confidence in them. If bought now, these stocks are likely to outperform others and create long-term wealth. However, selecting stocks to buy could be a tricky proposition, especially with oil prices moving like a roller-coaster. One should focus on picking up stocks that have a sound business, good management, and are not pricey.
Image Source: Zacks Investment Research
Amid the uncertainty, it is necessary that investors adopt a cautious approach. It is prudent to opt for stocks that have further room for upside. While it is impossible to be sure about such outperformers, this is where the Zacks Rank, which justifies a company’s strong fundamentals, can come in really handy. In particular, we have shortlisted four companies that have outperformed oil prices over the year and have a Zacks Rank of #1 (Strong Buy) or 2 (Buy).
A #1 Ranked stock, Murphy USA is our first pick. It is a leading independent retailer of motor fuel and convenience merchandise in the United States. The proximity of Murphy USA’s fuel stations to Walmart supercenters helps it to leverage the strong and consistent traffic that these stores attract. MUSA’s acquisition of QuickChek Corporation — a family-owned food and beverage chain — is expected to improve its offerings.
Murphy USA beat the Zacks Consensus Estimate for earnings in two of the last four quarters and missed in the other two. It has a trailing four-quarter earnings surprise of 7%, on average. Over the past 60 days, MUSA saw the Zacks Consensus Estimate for 2023 move up 13.2%.
Our second choice is The Williams Companies — a premier energy infrastructure provider in North America. The company’s core operations include finding, producing, gathering, processing and transportation of natural gas and natural gas liquids. Boasting a widespread pipeline system of more than 33,000 miles of pipelines, Williams is one of the largest domestic transporters of natural gas by volume. This Tulsa, OK-based Zacks Rank #1 stock, has a current market cap of $42.7 billion.
Over the past 60 days, the company saw the Zacks Consensus Estimate for 2023 move up 10.4%. The 2023 Zacks Consensus Estimate for WMB indicates 17% year-over-year earnings per share growth. It has a trailing four-quarter earnings surprise of roughly 13.7%, on average.
Then we have Sunoco LP. Headquartered in Dallas, TX, SUN participates in the transportation and supply phase of the U.S. petroleum market across a number of states. It also focuses on motor fuel distribution to convenience stores, independent dealers and commercial customers. The Zacks #1 Ranked firm pays out 84.20 cents quarterly distribution ($3.368 per unit annually), which gives it a 5.7% yield at the current unit price.
Over the past 60 days, Sunoco saw the Zacks Consensus Estimate for 2023 move up 21.8%. The 2023 Zacks Consensus Estimate for SUN indicates 10.9% year-over-year earnings per share growth. It has a trailing four-quarter earnings surprise of roughly 28.3% on average.
Finally, there is CrossAmerica Partners LP. Headquartered in Allentown, PA, wholesale distributor of motor fuels CrossAmerica Partners’ variable rate margins helped it offset the loss in volumes during the pandemic. Further, CAPL’s recent acquisitions of retail and wholesale assets provide it with a wider reach and scale.
Over the past 60 days, CrossAmerica Partners saw the Zacks Consensus Estimate for 2023 move up 25%. The Zacks Rank #1 firm, which pays out 52.50 cents quarterly distribution to yield more than 9%, beat the Zacks Consensus Estimate for earnings thrice in the trailing four quarters and missed in the other.
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4 Energy Stocks That Escaped the Sector Shortfall in 2023
The year 2023 has witnessed an impressive rally on Wall Street, propelled by a consistent decline in inflation and a simultaneous moderation in both the scale and frequency of interest rate hikes by the Federal Reserve. Illustrating this trend, the S&P 500 has surged 22.4% year to date to come within a whisker of its all-time highs.
While the market continues to be largely bullish, the Oil/Energy sector has been engulfed in a downtrend. Against this backdrop, it will be fruitful to invest in top-ranked companies that have defied the sector’s lackluster performance this year.
Taking this into account, Murphy USA (MUSA - Free Report) , The Williams Companies (WMB - Free Report) , Sunoco LP (SUN - Free Report) and CrossAmerica Partners LP (CAPL - Free Report) make the cut.
What’s Driving the Index Higher?
Complementing the diminishing inflation, the U.S. economy's fundamentals remain robust. With a staggering 5.1% growth in GDP during the third quarter of 2023 and resilient consumer spending, the economic landscape looks promising. Additionally, signals from the central bank suggest an approaching conclusion to the current rate hike cycle. The anticipation of lower market interest rates is expected to lower the cost of funds, providing companies with opportunities to initiate projects and boost capital expenditure.
Energy: One of the Few S&P 500 Laggards
While the S&P 500 equity index has been on a tear, it has been a wild ride for the energy market in 2023, setting pulses racing of even the steadiest investors. In fact, Oil/Energy has been one of the worst-performing sectors. The space has witnessed a total return of (3.5%) so far this year against the S&P 500’s gain of more than 22%.
At around $74 per barrel, crude prices are some 20% lower than the 2023 highs reached in late September, primarily due to global economic uncertainties, expanding production capabilities outside OPEC, and abundant inventories. China's economic struggles further dampen global demand forecasts. Meanwhile, natural gas is trading below $3 on high production and predictions of insipid weather-related demand.
A Handful of Companies Defied the Downturn
Even amid a volatile, declining market, some companies have stood firm, indicating investors’ confidence in them. If bought now, these stocks are likely to outperform others and create long-term wealth. However, selecting stocks to buy could be a tricky proposition, especially with oil prices moving like a roller-coaster. One should focus on picking up stocks that have a sound business, good management, and are not pricey.
Image Source: Zacks Investment Research
Amid the uncertainty, it is necessary that investors adopt a cautious approach. It is prudent to opt for stocks that have further room for upside. While it is impossible to be sure about such outperformers, this is where the Zacks Rank, which justifies a company’s strong fundamentals, can come in really handy. In particular, we have shortlisted four companies that have outperformed oil prices over the year and have a Zacks Rank of #1 (Strong Buy) or 2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our Choices
A #1 Ranked stock, Murphy USA is our first pick. It is a leading independent retailer of motor fuel and convenience merchandise in the United States. The proximity of Murphy USA’s fuel stations to Walmart supercenters helps it to leverage the strong and consistent traffic that these stores attract. MUSA’s acquisition of QuickChek Corporation — a family-owned food and beverage chain — is expected to improve its offerings.
Murphy USA beat the Zacks Consensus Estimate for earnings in two of the last four quarters and missed in the other two. It has a trailing four-quarter earnings surprise of 7%, on average. Over the past 60 days, MUSA saw the Zacks Consensus Estimate for 2023 move up 13.2%.
Our second choice is The Williams Companies — a premier energy infrastructure provider in North America. The company’s core operations include finding, producing, gathering, processing and transportation of natural gas and natural gas liquids. Boasting a widespread pipeline system of more than 33,000 miles of pipelines, Williams is one of the largest domestic transporters of natural gas by volume. This Tulsa, OK-based Zacks Rank #1 stock, has a current market cap of $42.7 billion.
Over the past 60 days, the company saw the Zacks Consensus Estimate for 2023 move up 10.4%. The 2023 Zacks Consensus Estimate for WMB indicates 17% year-over-year earnings per share growth. It has a trailing four-quarter earnings surprise of roughly 13.7%, on average.
Then we have Sunoco LP. Headquartered in Dallas, TX, SUN participates in the transportation and supply phase of the U.S. petroleum market across a number of states. It also focuses on motor fuel distribution to convenience stores, independent dealers and commercial customers. The Zacks #1 Ranked firm pays out 84.20 cents quarterly distribution ($3.368 per unit annually), which gives it a 5.7% yield at the current unit price.
Over the past 60 days, Sunoco saw the Zacks Consensus Estimate for 2023 move up 21.8%. The 2023 Zacks Consensus Estimate for SUN indicates 10.9% year-over-year earnings per share growth. It has a trailing four-quarter earnings surprise of roughly 28.3% on average.
Finally, there is CrossAmerica Partners LP. Headquartered in Allentown, PA, wholesale distributor of motor fuels CrossAmerica Partners’ variable rate margins helped it offset the loss in volumes during the pandemic. Further, CAPL’s recent acquisitions of retail and wholesale assets provide it with a wider reach and scale.
Over the past 60 days, CrossAmerica Partners saw the Zacks Consensus Estimate for 2023 move up 25%. The Zacks Rank #1 firm, which pays out 52.50 cents quarterly distribution to yield more than 9%, beat the Zacks Consensus Estimate for earnings thrice in the trailing four quarters and missed in the other.