Oil prices have fallen in recent months as concerns about the prospects of a global recession and COVID-19 flare-ups in China threaten demand growth. According to a survey by Reuters, 30 economists forecast that Brent crude would average $89.37 a barrel in 2023, about 4.6% lower than the $93.65 consensus in a November survey.
However, growing fears of an economic slowdown might be a potential buying opportunity for investors looking to ride on oil stocks that could be poised to soar higher. In addition, UBS analysts expect oil demand to grow significantly in the second half of 2023, driven by China’s reopening.
Also, given the high inflationary environment, investing in stocks that have gained momentum recently and are well-positioned to maintain the same based on their solid fundamentals and growth prospects, irrespective of the market fluctuations, could be a good strategy.
Investors’ interest in momentum stocks is evident from the Invesco DWA Momentum ETF’s (PDP) 6.1% returns over the past six months. Therefore, APA Corporation (APA) and PBF Energy Inc. (PBF), which have maintained strong momentum despite market fluctuations, could be ideal buys now.
APA Corporation (APA)
APA is an energy company, which explores, develops, and produces natural gas, crude oil, and natural gas liquids (NGLs). It operates in the United States, Egypt, and the offshore United Kingdom in the North Sea, Suriname, and other international locations.
On November 9, 2022, the company announced a multi-year partnership with the Clean Cooking Alliance to assist in universal access to clean cooking by 2030. This partnership is driven by expanding energy access that aligns perfectly with the company’s social investment strategy.
In the same month, APA achieved its ESG goal of reducing upstream routine flaring across Egypt operations by 40%, thanks to numerous emissions reduction projects executed in Egypt throughout 2022. This reflects its consistency and a strong commitment to its environmental goals.
APA’s total revenues rose 40.2% year-over-year for the third quarter that ended September 30, 2022, to $2.89 billion. The company’s attributable net income and EPS came in at $422 million and $1.28 versus a net loss and loss per share of $113 million and $0.30, respectively, in the prior-year quarter. Also, its adjusted EBITDAX came in at $1.69 billion, up 45.9% year-over-year.
In terms of forward non-GAAP P/E, APA is trading at 5.19x, 35.1% lower than the industry average of 7.99x. Its forward EV/EBITDA multiple of 2.98 is 44.2% lower than the industry average of 5.34. In addition, its forward EV/EBIT ratio of 3.50 is 52.4% lower than the industry average of 7.35.
Street expects APA’s revenue and EPS to increase 0.7% and 51.7% year-over-year to $2.42 billion and $1.96, respectively, for the fiscal fourth quarter (ended December 31, 2022). Shares of APA have gained 44.8% over the past year and 34% over the past nine months to close the last trading session at $42.89.
APA is currently trading above its 100-day and 200-day moving averages of $42.31 and $41, respectively, indicating an uptrend.
APA’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Momentum and Quality. Within the 93-stock B-rated Energy – Oil & Gas industry, APA is ranked #24. To see additional POWR Ratings for APA for Growth, Value, Stability, and Sentiment, click here.
PBF Energy Inc. (PBF)
PBF is a petroleum refiner and supplier of gasoline, diesel fuel, jet fuel, unbranded transportation fuels, heating oil, petrochemical feedstocks, lubricants, and other petroleum products. The company operates through two segments: Refining and Logistics.
On December 12, 2022, backed by its continued momentum and strong cash generation capabilities, PBF’s board of directors authorized a new $500 million share repurchase program of Class A common stock.
On November 30, 2022, PBF and PBF Logistics LP (PBFX) announced the completion of the previously announced agreement and plan of merger to acquire all the outstanding common units representing limited partner interests of PBFX. The combined company is expected to benefit.
For the third quarter, which ended September 30, 2022, PBF’s revenues increased 77.6% year-over-year to $12.76 billion. Its income from operations rose 1,287.5% from its year-ago value to $1.40 billion.
The company’s adjusted net income increased 1,684.1% year-over-year to $1.06 billion, while its EPS grew 1,614.3% from the prior-year quarter to $8.40. Also, its adjusted EBITDA grew substantially from the year-ago value to $1.54 billion.
In terms of forward non-GAAP P/E, PBF is trading at 1.61x, 79.8% lower than the industry average of 7.99x. Its forward EV/EBITDA multiple of 1.46 is 72.7% lower than the industry average of 5.34. In addition, its forward EV/EBIT ratio of 1.61 is 78.1% lower than the industry average of 7.35.
Analysts expect PBF’s revenues to increase 19.6% year-over-year to $9.86 billion in its fiscal fourth quarter that ended December 31, 2022. Its EPS is expected to increase 317.2% year-over-year to $5.34 in the about-to-be-reported quarter. It surpassed the consensus EPS estimates in three of the trailing four quarters.
Over the past year, the stock has gained 154.81% to close the last trading session at $39.24. Also, it is currently trading above its 100-day and 200-day moving averages of $38.71 and $34.50, respectively, indicating an uptrend.
PBF’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, which translates to Buy in our proprietary rating system.
It has an A grade for Growth, Value, and Momentum and a B for Quality. Within the same industry, it is ranked #8 of 93 stocks. Click here to see the other ratings of PBF for Stability and Sentiment.
APA shares were trading at $44.07 per share on Monday morning, up $1.18 (+2.75%). Year-to-date, APA has declined -5.59%, versus a 2.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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