Unlocking Year-End Gains with Energy Stocks

Amid heightened demand for oil and gas, the energy sector is on the brink of substantial expansion. Moreover, Wall Street analysts expressed optimistic views triggered by constrained supply. Given this backdrop, quality energy stocks Marathon Petroleum Corporation (MPC), ChampionX Corporation (CHX), and Liberty Energy (LBRT) could be solid buys for year-end gains. Read on….

The global oil industry stands on the precipice of a significant transformation as OPEC+ nations limit their oil production. Additionally, amid the vigorous demand for oil and gas, Wall Street analysts project an upward trajectory in market performance, bolstering investor interest in this sector. Expectations of considerable profit gains especially favor companies already situated to capitalize on this industry-wide growth.

Given this backdrop, it could be wise to add fundamentally robust energy stocks Marathon Petroleum Corporation (MPC), ChampionX Corporation (CHX), and Liberty Energy Inc. (LBRT) to your portfolio now.

Before exploring the fundamentals of these stocks, let’s scrutinize the industry’s evolving dynamics.

In a drive for sustainable energy, over 140 nations worldwide have established net-zero emission objectives, thus hastening the transition toward renewable resources. Despite the increased adoption of clean energy solutions, the global oil and gas demand is anticipated to remain robust. In 2023, the International Energy Agency (IEA) expects global oil demand to increase by 2.4 million barrels per day (bpd) and 930,000 bpd by 2024.

This winter, meteorologists anticipate milder temperatures up until December 23, yet traditional cooling trends could augment U.S. gas demand in the Lower 48 states, including exports. LSEG predicts a rise from 121.3 billion cubic feet per day (bcfd) this week to 124.8 bcfd the following week and 127.3 bcfd in two weeks.

The United States stands on the edge of leapfrogging Australia and Qatar to emerge as the world’s top supplier of Liquefied Natural Gas by 2023. Soaring oil prices, supply disruptions, and sanctions associated with the ongoing conflict in Ukraine have amplified international demand for U.S. exports.

Amid geopolitical unrest and voluntary production cuts by Saudi Arabia and Russia, oil prices could surge further. Analysts at UBS Group AG (UBS) and The Goldman Sachs Group, Inc. (GS) foresee a probable increase in oil prices because of the implementation of these voluntary cutbacks. Forecasted Brent oil prices for 2024 are expected to hover between $80 and $100.

In light of these encouraging trends, let’s look at the fundamentals of the three energy stocks.

Marathon Petroleum Corporation (MPC)

MPC operates as an integrated downstream energy company primarily in the United States. It operates in two segments: Refining & Marketing and Midstream.

On October 25, MPC’s board of directors approved an increase to the quarterly dividend to $0.825 per share, payable to the shareholders on December 11, 2023. Its annualized dividend rate of $3.30 per share translates to a dividend yield of 2.31% on the current share price. Its four-year average yield is 3.85%.

MPC’s dividend payments have grown at CAGRs of 9.9% and 10.8% over the past three and five years, respectively. The company has a record of paying dividends for 12 consecutive years.

The Board of Directors approved an incremental $5 billion share repurchase authorization. With the addition of this new authorization, the company has a total of $8.3 billion available under its share repurchase authorizations as of October 27.

MPC’s trailing-12-month cash from operations of $17.38 billion is significantly higher than the industry average of $669.40 million. Its trailing-12-month ROCE, ROTC, and ROTA of 43.98%, 16.33%, and 12.84% are 120%, 75.6%, and 71.4% higher than the industry averages of 19.99%, 9.30%, and 7.49%, respectively.

In the fiscal third quarter, the company returned approximately $3.1 billion of capital to shareholders through $2.8 billion in share repurchases and $297 million of dividends.

In the fiscal third quarter that ended September 30, 2023, MPC’s total revenues and other income and income from operations stood at $41.58 billion and $4.75 billion, respectively. Its adjusted income per share increased 4.2% from the year-ago quarter to $8.14.

For the same quarter, adjusted net income attributable to MPC and adjusted EBITDA stood at $3.22 billion and $5.71 billion, respectively. As of September 30, 2023, its total current assets came at $36.28 billion, compared to $35.24 billion as of December 31, 2022.

Street expects MPC’s revenue and EPS for the fiscal fourth quarter ending December 2023 to be $35.40 billion and $2.80, respectively. The company surpassed consensus EPS estimates in each of the trailing four quarters and consensus revenue estimates in three of the trailing four quarters, which is impressive.

The stock has gained 34.7% over the past year to close the last trading session at…