Industry Overview - The Zacks Oil and Gas - Refining & Marketing industry includes companies that sell refined petroleum products and non-energy materials, and operate terminals and transportation services [2] - Refining margins are volatile and influenced by petroleum product inventories, demand, imports, and capacity utilization [2] Current Trends - Refining margins have weakened from the highs of 2022, with crack spreads narrowing due to lower refined product prices relative to crude oil [3] - Strong demand for gasoline and diesel is driven by travel and mobility, with gasoline inventories slightly below the five-year average and distillate stocks 9% lower [4] - Supply-chain challenges and cost inflation are impacting refiners' ability to deliver volumes, with higher transportation expenses and labor shortages limiting profitability [5] Industry Performance - The industry is currently ranked 205 in the Zacks Industry Rank, placing it in the bottom 18% of over 250 Zacks industries, indicating dull near-term prospects [6][7] - The industry's earnings estimate for 2024 has decreased by 20.9% over the past year, while the estimate for 2025 has fallen by 8.6% [8] Valuation Metrics - The industry is trading at an EV/EBITDA ratio of 3.55X, significantly lower than the S&P 500's 18.90X but above the sector's 3.09X [11] - Over the past five years, the industry's EV/EBITDA has ranged from 1.84X to 6.76X, with a median of 3.67X [11] Stocks in Focus - Galp Energia: A Portuguese integrated energy firm with a market capitalization of $14.5 billion and a four-quarter average earnings surprise of 64.3% [14] - Valero Energy: The largest independent refiner in the U.S. with a refining capacity of 3.2 million barrels per day, expected EPS growth rate of 4% [15] - Murphy USA: A leading independent retailer with a market capitalization of $10.8 billion, shares have gained 50.9% in a year [18]
3 Refining & Marketing Stocks to Watch Amid a Challenging Environment