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Exxon Mobil shares are rated at Buy with a $140 price target by Bank of America analyst Doug Leggate.
Scott Olson/Getty Images
Energy stocks have trailed the
S&P 500
this year, as earnings for most companies are expected to fall from 2022 levels. The sector is healthy but investors are less interested now that oil and natural-gas prices appear to be past their peak.
That said, analysts have been warming to several stocks in recent weeks, boosting their earnings estimates following fourth-quarter earnings reports.
Barron’s screened for energy companies in the S&P 1500 where analysts have increased their full-year earnings estimates over the past month, following fourth- quarter 2022 results. When analysts boost estimates, it generally means something in company’s earnings call or projections made them more optimistic about how the companies will fare this year. It can be a sign of positive momentum.
Seven companies have gotten positive 2023 earnings estimate revisions from at least eight analysts in the past month. Given the relative weakness in oil and gas prices over that period, all seven stocks are down.
| Company / Ticker | Price | Market Cap ($B) | Analysts’ Upward EPS Revisions* | Price Change* |
|---|---|---|---|---|
| Exxon Mobil / XOM | $110.75 | $456 | 15 | -2.7% |
| Valero Energy / VLO | 132.75 | 51 | 15 | -8.5 |
| Marathon Petroleum / MPC | 124.92 | 59 | 11 | -4.1 |
| NOV / NOV | 21.65 | 9 | 11 | -7.5 |
| Phillips 66 / PSX | 102.00 | 48 | 9 | -4.7 |
| Helmerich & Payne / HP | 41.15 | 4 | 8 | -14.6 |
| Marathon Oil / MRO | 25.59 | 16 | 8 | -8.1 |
*In the past month
Source: Factset
Fifteen analysts increased their 2023 estimates for
Exxon
Mobil (ticker: XOM) in the past month, many of them reacting to Exxon’s better than expected earnings report on Jan. 31. Bank of America analyst Doug Leggate, for instance, lifted his earnings per share estimate to $9.32 from $9.21.
“Exxon has emerged from an extended period of counter cyclical investment as the only material free cash flow growth story of the integrated oils,” Leggate wrote. He rates shares at Buy with a $140 price target.
Several of the stocks getting positive attention from analysts are refiners. After margins for several kinds of fuels hit record highs last year because of shortages caused by Russia’s invasion of Ukraine, they have stayed relatively high in recent weeks—though not at last year’s levels. Some analysts expect products such as diesel to once again be in short supply this year, because the EU and U.S. banned Russian fuel and imposed price caps on shipments elsewhere.
Valero
(VLO) has gotten 15 analyst earnings upgrades in the past month, leading the pack.
Phillips 66
(PSX) and
Marathon Petroleum
(MPC) have also seen several positive revisions.
“We believe Valero remains extremely well-positioned to capitalize on the strength of the global refining backdrop as the ripple effects of Europe’s energy crisis add to the advantages of Valero’s top-tier portfolio,” wrote Jefferies analyst Justin Jenkins, who boosted his full-year EPS estimate to $25 from $21. He rates shares at Strong Buy with a $174 price target.
Some oil service and equipment companies have also gotten attention from analysts. NOV (NOV) and
Helmerich & Payne
(
HP
) have both received several positive estimate revisions. As oil and gas producers increase drilling coming out of the pandemic, they will likely need to pay up more for services.
Marathon Oil
(MRO) is the only independent oil producer that made the list. The Houston firm has increased its share buybacks, which tends to help boost earnings per share.
“We have delivered per share growth across all the metrics that matter via a consistent share repurchase program that leads our peers in addition to a durable and competitive base dividend,” said CEO Lee Tillman on the company’s latest earnings call.
Write to Avi Salzman at avi.salzman@barrons.com
