With oil prices cooling off, U.S. refining stocks have been notching up healthy earnings estimates gains.
Crude Skids to 17-Month Lows
The West Texas Intermediate (WTI) crude futures declined for the third time in 4 weeks to close at $89.74 per barrel on Friday. Oil prices fell below $90 to their lowest level since Apr 2013 on plentiful supplies and lackluster demand. Moreover, a stronger dollar made the greenback-priced crude dearer for investors holding foreign currency.
Refiners to Gain
With refiners being buyers of oil – whose price saw a steep decline recently – their third quarter profitability is likely to be better due to a fall in the input cost.
Estimates Rise
Sensing a favorable earnings outlook for the third quarter of 2014, analysts have been bullish on the sector components. The positive estimate revision activity for some of the big names is provided below.
Valero Energy Corp. (VLO): For the current quarter, we have seen 4 estimates moving up in the past 30 days, compared with 2 downward revisions. This trend has caused the Zacks Consensus Estimate to trend higher, going from $1.09 per share a month ago to its current level of $1.30.
Tesoro Corp. (TSO): Tesoro has seen 4 upward estimate revisions versus a single revision in the opposite direction, pushing the third quarter Zacks Consensus Estimate up to $1.77 a share from $1.45 over the past 30 days.
Marathon Petroleum Corp. (MPC): For the three-months ending Sep 30, 2014, the company has witnessed 5 positive revisions in the past one month, while just 2 estimates moved down. Consequently, the Zacks Consensus Estimate for earnings has improved from $1.94 to $2.31.
HollyFrontier Corp. (HFC): For the current quarter, we have seen 5 estimates moving up in the past 30 days, compared with 1 downward revision. This trend has caused the Zacks Consensus Estimate to trend higher, going from 84 cents per share a month ago to its current level of 94 cents.
All the companies mentioned above currently carry a Zacks Rank #3 (Hold), which is also a favorable signal. What’s more, earnings estimate strength may actually push them to a Zacks Rank #1 (Strong Buy) or to a Zacks Rank #2 (Buy).
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