The U.S. Congress, fast becoming a proxy war between Democrats and Republicans yet again, currently deals with issues ranging from easing regulation on the financial industry to a feud over the Canadian crude pipeline project, Keystone XL.
The 114th U.S. Congress has been passed to Republican hands for the first time since 2006. With November’s midterm elections placing both the Senate and the House of Representatives under GOP control, we can expect the tug-of-war between Democrats and Republicans to intensify in the final two years of the run-up to the 2016 presidential election.
Sparks Aplenty
With Republicans holding sway in both chambers of the U.S. Congress, a spark is all that is needed to fuel the run up to the next incumbent of White House. Obama’s push for reforms can provide the Republicans with an array of choices including a health care law, key environmental and business regulations, and recent executive actions on immigration sparing millions from deportation.
Will Keystone Show Off Republican Muscle?
The battle lines, however, have already been drawn over the fate of the Keystone XL oil pipeline expansion. If approved, the pipeline would connect the oil sands of Alberta, Canada and the U.S. Gulf Coast.
The Republicans, along with a cross section of Democrats, are pushing for approval of the pipeline which they feel would pump up the U.S. economy with multi-millions in revenues and lots of jobs. They also advocate that the pipeline would drag down oil transportation and provide a breather for oil firms hammered by the sharp drop in prices of crude.
On the other hand, with backing from environmentalists, the White House has suggested a presidential veto on the Keystone XL bill if Congress bypasses the ongoing review of the project. Apprehensions pertaining to the Keystone project at the White House center around greenhouse gas emissions from Alberta's oil sands. The White House also argues developing domestic alternative energy projects could create more permanent jobs across the value chain than Keystone would.
However, we feel that the Keystone imbroglio is only a matter of political muscle flexing as the Republicans are pushing hard for the project at a time when the world is awash with cheap oil. Also, as per the State Department estimate, the project would create only 35 permanent U.S. jobs.
Republican Conservatism vs. Greener Democrats
The broader market subsequent to the Republican sweep in November midterm elections has widely split. The gaping divide can be traced back to the Republican reservations about the higher cost structure of alternative energy projects that are up against the Democratic drive to expedite the development of alternative fuel sources, increase energy efficiency standards and promote vehicles that use alternative fuels.
3 Energy Stocks to Beat the Political Quandary
We advise energy investors carefully select stocks with an attractive offering of a favorable Zacks Rank, positive earnings estimate revisions and a track record of positive earnings surprises. These stocks are poised to sustain their form through the ongoing political controversy.
Independent refiner and marketer of refined petroleum products, Tesoro Corporation (TSO), based out of San Antonio, TX, is our first pick. This Zacks Rank #2 (Buy) stock, posted growth of approximately 30% over the past year, when oil stocks across the value chain were hammered hard by the plummeting price of crude.
TSO is also a consistent performer having beaten the Zacks Consensus Estimate in two of the last four quarters with a positive earnings surprise of 7.65%. The long-term earnings growth expectation is 18.75%.
Findlay, OH-based master limited partnership, MPLX LP (MPLX) registered growth of 75.58% over the past one year. With the current quarterly and full-year estimates steadily moving northwards, we can expect more upside more investors.
This Zacks Rank #2 (Buy) stock has been a stable performer, surpassing the Zacks Consensus Estimate in two out of the last four quarters with an average beat of 2.70%. The long-term expected earnings growth rate is 32.60%. MPLX’s ROE of 12.49% is also significantly higher than the peer group average of 1.89%.
Hamilton, Bermuda-based limited partnership Golar LNG Partners LP (GMLP) is the last of our trio. The international provider of floating storage and regasification services brought home for investors a tidy return of 2.84% over the past year.
This Zacks Rank #1 (Strong Buy) stock has been a straight performer, beating the Zacks Consensus Estimate in each of the last four quarters with an average beat of 64.31%. The trend is expected to continue in the future as estimates are steadily improving for the current quarter and next full year. The long-term expected earnings growth rate is 9.00%.
End Note
We expect Capitol Hill to turn into a political battlefield in its run up to the 2016 presidential elections. As such, investors can expect two eventful years thanks to the Keystone issue rather than a steady diet of Fed Chair Yellen’s interest rate musings and geopolitical rumblings across the globe.
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