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 and a slash in oil price forecast by several investment banks have put the final nail in the coffin.
With U.S. inventories building up at a record pace, the gloom in the oil market is only deepening. The U.S. Energy Department's latest weekly inventory release showed that crude stockpiles jumped by 8.9 million barrels for the week ending Jan 23, 2015, following a climb of 10.1 million barrels in the previous week.
Following the largest two-week inventory surge in almost 30 years, at 406.73 million barrels, current crude supplies are up 13.7% from the year-ago period and are at the highest levels during this time of the year in at least 80 years. Moreover, continued strength in domestic production – now at an all-time highest level – have made things worse.
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 $43.58 earlier in the week.
3 Companies with Rising Earnings Estimates Despite Oil Weakness
However, even in the dismal last quarter for the energy market, there are certain companies in the sector whose earnings estimates are on the rise – at least 20% over the past 30 days. In essence, the slump in oil prices has not deterred analysts from upwardly revising their fourth quarter profit forecast for these firms. Below we present three such stocks, each of which also has a good Zacks Rank.
Tesoro Corp. (TSO): San Antonio, Texas-based Tesoro is an independent refiner and marketer of refined petroleum products in the western U.S. The Zacks Consensus Estimate for this Zacks Rank #2 (Buy) stock’s fourth quarter has gone up 24 cents (or 20%) to $1.43 per share over the last 30 days.
Tesoro also has a decent track record: it's beaten estimates in two of the last four quarters at an average rate of 7.7%. Lastly, the downstream operator boasts of an impressive long-term expected earnings growth rate of 19.20%. Tesoro will announce fourth quarter results on Feb 11.
Murphy USA Inc. (MUSA): Murphy USA is a retailer of gasoline products and convenience store merchandise primarily in the US. The El Dorado, Arkansas-headquartered stock is a Zacks Rank #3 (Hold) 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. Murphy USA will announce fourth quarter results on Feb 4.
PBF Energy Inc. (PBF): Parsippany, NJ-based PBF Energy’s primary business is to refine crude oil and supply the refined petroleum products. In addition to trading around 8.5 times forward estimates (substantially under the peer group average of 13.4), PBF Energy sports a trailing 12-month return on equity (ROE) of 20.8% – against its peer group average of 13.7%.
Quarterly earnings projections for this Zacks Rank #3 company are also on an upswing with the Zacks Consensus Estimate for the fourth quarter climbing 27 cents (or 66%) to 68 cents over the past month. PBF Energy will announce fourth quarter results on Feb 12.
Bottom Line
Notwithstanding the oil price collapse, investors can benefit from the recent earnings estimate revisions for the above mentioned companies. This is an indicator that good things are in the offing, starting with an imminent earnings beat.
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