Currently, oil is deeply entrenched into bearish territory and has fallen below the $50-a-barrel level following OPEC’s decision to hold production unchanged, the effects of booming shale supplies in North America and a stagnant European economy. Moreover, a stronger dollar has made the greenback-priced commodity more expensive for investors holding foreign currency. The cut in global crude demand growth by major energy consultative bodies has put the final nail in the coffin.
While the OPEC international oil cartel cut its 2015 forecasted consumption by 280,000 barrels per day from its previous expectation, the U.S. Energy Information Administration (EIA) trimmed its demand outlook for next year by 240,000 barrels per day. Paris-based International Energy Agency (IEA) reduced its 2015 global oil demand growth forecast by 230,000 barrels per day — all pointing toward a slowdown in world consumption.
Still in stormy waters, crude remains beaten down and endured its biggest yearly fall last year since 2008. West Texas Intermediate (“WTI”) has more than halved in value since June on oversupply fears in the face of weak demand, reaching an almost six year low of $44.20 earlier this month.
3 Companies That Defied the Market Slump
However, even in the dismal last quarter for the energy market, three companies in the sector managed to record handsome gains – in excess of 20%. In essence, the slump in oil and gas prices has not translated into weaker share prices for these firms. What’s more, each of them also has a good Zacks Rank.
MPLX L.P. (MPLX): Shares of Findlay, OH-based master limited partnership, MPLX L.P. registered growth of 24% over the past three months. This Zacks Rank #2 (Buy) stock’s long-term expected earnings growth rate is an impressive 32.60%, while MPLX’s ROE of 12.5% is also essentially in line with peers.
Having done a stellar job at increasing distribution and cash flows, analysts are predicting strong earnings growth for MPLX over the next couple of years. The 2014 Zacks Consensus Estimate is $1.66, representing 58% earnings per share growth over 2013. The 2015 forecast is $2.44, corresponding with 47% growth.
Murphy USA Inc. (MUSA): Murphy USA is a retailer of gasoline products and convenience store merchandise primarily in the US. The El Dorado, AR-headquartered stock – which has gained some 25% over the past three months – is a Zacks Rank #2 that’s surprised earnings to the upside each of the last two quarters.
Based on the company’s healthy expected fuel and merchandise profitability, the tendency for an upward estimate revision has been more obvious in recent times. In fact, the Zacks Consensus Estimate for the fourth quarter has gone up 52 cents (or 55%) to $1.47 per share over the last 30 days.
Dominion Midstream Partners L.P. (DM): A premier integrated midstream player with core operations in the Marcellus/Utica shales, Richmond, VA-based Dominion offers investors an opportunity to capture income growth through steadily-rising cash distributions and capital appreciation. This Zacks Rank #2 firm, whose units have jumped almost 28% in the past three months, boasts of low-risk and stable cash flow-generating energy infrastructure assets.
Additionally, the partnership continues to leverage its relationship with Dominion Resources Inc. (D) to make ‘drop-down’ transactions (or asset buys from the partnership's sponsor company). The ‘drop-downs’ are expected to be immediately accretive to Dominion Midstream’s distributable cash flow, thereby boosting cash distributions.
Bottom Line
Despite the bloodbath, investors need not fear or steer clear of energy stocks as there are still a handful of them that are showing strength during this shaky period.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment