Although the energy sector remains a turbulent spot for investments, some corners of the space are finally starting to look promising. That is because oil appears to have stabilized in its current range which is putting many investors at ease for the time being.
And while you might not expect this to be the case, the oil refining/marketing segment is actually well positioned to take advantage of current market trends and could be a go-to spot for those seeking to make a solid choice here. After all, the Zacks Industry Rank for this segment is currently in the top 15% overall so many companies are looking quite impressive right now.
So while there are a number of choices worth considering in this space, one firm in particular that might be worth a closer look is Western Refining (WNR). This mid cap stock can be volatile, but it may very well be the class of the industry and a top choice for those seeking energy exposure in today’s somewhat rocky environment.
WNR in Focus
Western Refining is an independent crude oil refining company based in El Paso, Texas. WNR has refineries in Texas, New Mexico, and Minnesota as well as retail operations in those areas of the country, while there is a partially owned MLP component too.
Thanks to the company’s structure and its efficiency, WNR has been able to produce a gross margin per barrel that is nearly untouched by its peers, with current margins hitting the $16-$18/bbl. level. And with strong income prospects, the company has been able to pass along a solid 2.5% yield to investors, making it a good income destination as well.
But beyond these factors, it is important to note that WNR has a forward PE of just 12 which is far lower than the industry average. And with better net profit margins, ROE and debt to equity than the industry at large, it becomes clear that WNR is the top of the class in this now well-positioned industry. Though if that wasn’t enough, it may be best to consider the company’s growth prospects as well as the recent trend in earnings estimate revisions by analysts tracking WNR.
Earnings Estimates
Investors have seen soaring earnings estimates for WNR as of late, and near total agreement from analysts regarding the company’s prospects. In fact, for the current year time frame, six estimates have gone higher compared to zero lower, while two have gone higher for the next year period compared to zero lower again, at least over the past 30 days for both.
The magnitude of the change over the past month has also been impressive, as the current quarter moved from 69 cents a share to 84 cents a share over the past month, while the current year has soared from $3.39/share to $3.97/share today over the same 30 day time frame.
Plus, WNR has been doing well when it comes to beating earnings estimates too. The company has put up beats in three of the last four quarters, including an average surprise of just over 10% in the past year.
Bottom Line
Thanks to the above factors, WNR has earned itself a Zacks Rank #1 (Strong Buy), a stamp of approval that we only give to the best five percent of stocks in our universe. This means that we are looking for outperformance from this security in the near term, and are expecting good things out of WNR over the next 1-3 month period.
So if you are looking for a top choice in the mid cap oil space, definitely give WNR a closer look. Not only does the company pay a robust dividend, but it is fairly valued and it is seeing rising earnings estimates, suggesting that more solid trading might be ahead for this stock.
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WESTERN REFING (WNR): Free Stock Analysis Report
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