In the past few weeks, I’ve received a number of questions from subscribers about energy stocks. Some ask about what to do with their down-and-out holdings, others ask about whether it is time to bottom-fish. These are exactly the right kinds of questions to be thinking about – thanks for sending them.
By far the worst performing sector in recent years has been the energy sector. From its peak in mid-year 2014 when oil prices reached over $100/barrel to its current state of complete disarray, the S&P Energy Sector index has collapsed 63%. For comparison, the broad S&P 500 index has gained 65% and even the often-maligned Materials Sector index has risen by 25%.
Obviously, it has been very difficult (nearly impossible) to make any money holding energy stocks. The strongest performer in the S&P500 Energy sector, Cabot Oil & Gas (COG), saw its share price increase by a microscopic 3% in the past five years. Nearly all of the others have produced large losses. Returns have been so weak that the S&P 500 Index now includes only 21 energy stocks with market caps over $5 billion.
I currently have Marathon Petroleum (MPC) and Total (TOT) as “Hold” recommended stocks. These have somewhat unique traits that provide some appeal. I’m tempted by beaten-down but high-quality service companies like Schlumberger (SLB) and Helmerich & Payne (HP), but the cash flow prospects of these kinds of stocks in a $45 oil price environment seem too weak to support both debt service and capital spending requirements. Exploration and production companies typically carry unserviceably high debt yet must spend to maintain production, so they look more like call options than actual shares. Many are expiring worthless as they slide into bankruptcy.
Even most of the global majors need to further rein in their operations to sustainably balance their expenses, debt service, capital spending and dividends.
What would lead me to start buying more aggressively? I’m wiser (cautious?) about venturing in after taking losses on several energy stock holdings yet at the same time eyeing potentially vast upside in a recovery. The range of outcomes is exceptionally wide (100% to +500%) for many energy stocks, so my approach is to find ideas where the downside is limited enough that it makes the potential upside worth the risk. This is a work in progress.
While we probably have reached “peak oil” at 100 million barrels/day, global demand will remain sturdy and needs to be filled. Permanent impairment of many U.S. oilfields along with the broken E&P business model, and possible civil unrest in 3-5 years as currently-stable Mid-East regimes lose their ability to subsidize their populations, could weaken supplies. Eventually, demand for energy services will return while many low-quality providers will have vanished. It is very unclear yet when and at what price oil and natural gas will begin to reflect this scenario. Yet, while the near-term looks grim, these scenarios paint an optimistic longer-term picture.
Earnings note:
In addition to GM’s report this morning, several recommended companies report tomorrow (MKS Instruments, Total, Columbia Sportswear and Amazon).
Share prices in the table reflect Tuesday (July 28) closing prices. Send questions and comments to Bruce@CabotWealth.com.
TODAY’S PORTFOLIO CHANGES
Dow (DOW) – Moves from Buy to Hold.
Nvidia (NVDA) – Moves from Strong Buy to Buy.
LAST WEEK’S PORTFOLIO CHANGES (July 22 update)
Netflix (NFLX) – Moves from Hold to Retired.
GROWTH PORTFOLIO
Chart Industries (GTLS) is a leading global manufacturer of highly engineered equipment used in the production, transportation, storage and end-use of liquid gases (primarily atmospheric, natural gas, industrial and life sciences gases). Its equipment cools these gases, often to cryogenic temperatures that approach absolute zero. Chart has no direct peers, offering turnkey solutions with a much broader set of products than other industry participants. The company was featured in Cabot’s 10 Best Stocks to Buy and Hold for 2020.
The company generates positive free cash flow and is prioritizing reducing its modestly elevated debt from its 2019 cash acquisition of Harsco’s Industrial Air-X-Changers business, as well as continuing its sizeable cost-savings program.
Chart shares have gained 22% since it reported second quarter earnings last week. While sales growth was flat and adjusted per-share earnings fell about 7% from a year ago, the results were sharply higher than consensus estimates, with per-share earnings of $0.63 compared to the $0.41 estimate. Revenues were about 7% above consensus. The company reinstated its earnings guidance for full-year 2020 that was above estimates. Chart provided encouraging updates on its cost savings programs and described new initiatives and orders in hydrogen-based energy equipment. Overall, the company is performing well in an otherwise difficult economy.
The valuation remains reasonable at 18.6x estimated 2021 earnings of $3.18/share and 11.4x estimated 2021 cash operating profits. Earnings for 2021 are estimated to be about 14% higher than estimated 2020 earnings. The shares look poised to continue their recovery. Buy.
MKS Instruments (MKSI) generates about 49% of its revenues from producing critical components that become part of equipment used to make semiconductors. MKS’ products are generally in the stronger segments of this currently healthy market. While MKSI shares closely track the broad semiconductor indices, the expansion of its Advanced Markets segment, including its 2016 acquisition of Newport Corporation, as well as its 2019 acquisition of semiconductor-related Electro Scientific Industries, may allow its shares to break out. The company recently promoted 13-year company veteran Dr. John T.C. Lee to CEO. The $850 million in debt is modest relative to its earnings and is mostly offset by $500 million in cash balances.
MKS reports earnings tomorrow, Thursday, July 30. Analysts’ consensus estimate is for $1.18/share in earnings. Estimates point toward EPS growth of 11% and 37% in 2020 and 2021, respectively.
MKSI shares nudged up 2% since a week ago, essentially at their all-time set in early 2018. We suggest traders take their profits.
For longer-term holders of MKSI, the shares continue to track the Philadelphia Semiconductor Index (SOX), and a strong earnings report would provide encouraging evidence that its ESI acquisition is boosting its prospects. At 18.0x estimated 2021 earnings of $6.89, we consider the shares reasonably undervalued. Hold.
Quanta Services (PWR) is a leading specialty infrastructure solutions provider serving the utility, energy and communication industries. Their infrastructure projects have meaningful exposure to highly predictable, largely non-discretionary spending across multiple end-markets, with 65% of revenues coming from regulated electric, gas and other utility companies. Quanta achieved record annual revenues, operating income and backlog in 2019, and is pursuing a multi-year goal of increasing margins. Dividend payouts and share repurchase activity have continued uninterrupted during the pandemic.
We view this company as high-quality, well-run and resilient. The market views PWR shares as a safe haven in an unpredictable market and economy, helping the shares to fully recover from their March 2020 lows. The new 15-year contract to operate and modernize Puerto Rico’s energy grid is an encouraging positive as the company is seeking to shift toward a capital-light, recurring profit model. Quanta Services was featured in the July monthly issue of Cabot Undervalued Stocks Advisor.
Quanta confirmed that they will report earnings on Thursday, August 6. The consensus estimate remains at $0.47/share. For the full year, analysts estimate that Quanta’s earnings per share will dip about 5% in 2020 to $3.16, due to disruption costs related to the pandemic, then rebound over 22% to $3.86 in 2021.
PWR shares rose fractionally over the past week. On 2021 estimated earnings, the P/E is a reasonable 10.6x. Traders may consider exiting near 43. For long-term holders, Quanta stock looks well-positioned to continue to prosper. New investors should establish a starter position now and look to add on weakness. Buy.
Tyson Foods (TSN) is one of the world’s largest food companies, with over $42 billion in revenues last year. Beef products generate about 36% of total revenues, while chicken (31%), pork (10%), and prepared/other contribute the remaining revenues. It has the #1 domestic position in beef and chicken with roughly 21% market share in each. Its well-known brands include Tyson, Jimmy Dean, Hillshire Farms, Ball Park, Wright and Aidells. As only 13% of its sales come from outside the United States, Tyson’s long-term growth strategy is to participate in the growing global demand for protein. Tyson Foods was featured in the June issue of Cabot Undervalued Stocks Advisor.
Unlike many of its food company peers whose shares have fully recovered this year, or more, Tyson’s shares remain 32% below their year-end price and are seemingly stuck in a 58-65 range, with almost no change in the past week.
Much of this underperformance is due to absentee issues surrounding its processing facilities (there is no evidence that the virus is transmissible to meat products), oversupply conditions in the poultry industry and import restrictions by China. Also, Tyson is more of a commodity company than a diversified branded food company, so its exposure to weaker commodity prices and its much lower profit margins make it a less-defensive stock than its peers.
Tyson reports earnings on August 3. Its profits are expected to fall 17% in 2020 due to pandemic business disruptions, then rise 29% in 2021. The 2020 P/E is 13.4x. The shares produce a 2.8% dividend yield. The company’s business is starting to improve, particularly from its food service segment that suffered from stay-at-home restrictions, as well as from its emerging and higher-margin prepared foods business. Buy.
Universal Electronics (UEIC) is a dominant producer of universal remote controls that subscription broadcasters (cable and satellite), TV/set top box/audio manufacturers and others provide to their customers. The company pioneered the universal remote, named the ‘One for All’, which was quickly adopted by consumers after its launch in 1986. Since then, the company has expanded into a range of remote control devices for smart homes, safety and security and other residential and commercial applications, driven by its extensive and valuable proprietary technology. Clients include every major cable and satellite company: AT&T, Cox, Dish, Comcast, Samsung, LG, Sony, Liberty, Daikin, Sky and more.
Strong and steady revenue and earnings growth drove the shares to over 80 by mid-2016, from only about 12 in mid-2012. However, the shares have stumbled and remain down about 45% from their peak. UEIC is a volatile, undervalued, micro-cap growth stock, appropriate for risk-tolerant investors and traders. Over the short-term, its shares generally correlate with overall market and economic re-opening sentiment. The company reports earnings on August 6.
UEIC shares ticked down in the past week, and trade at 12.9x estimated 2020 earnings of $3.71, and 10.6x estimated 2021 earnings of $4.52. Attractive buying opportunities are appearing as the shares remain near the midpoint of their recent range. Strong Buy.
Voya Financial (VOYA) is a U.S. retirement, investment and insurance company serving 13.8 million individual and institutional customers. Voya has $603 billion in total assets under management and administration. The company previously was the U.S. arm of Dutch financial conglomerate ING Group, from which it was spun off in 2013. Voya has several appealing traits. Even though it is well-capitalized, it is migrating toward a capital-light model, taking a major step in this direction by selling its life insurance business, which should close in the third quarter. Some of the released capital could be used to repurchase shares. Also, it won’t be a cash taxpayer for as many as five years due to its deferred tax assets. Voya is generating considerable free cash flow and its diversified and highly regarded product base offers steady long-term revenue strength.
Near-term issues for Voya are its COVID-related claims (readily manageable but not likely accurately modeled into estimates), the size of the positive impact of rising equity markets and the potential markdowns on its other investment assets. Voya will provide more color on these, along with an update on its life insurance exit, when it reports earnings on August 6.
The shares are essentially unchanged in the past week and continue to trade at an attractive 8.1x estimated 2021 earnings and 0.8x book value. Per share earnings in 2021 are expected to jump 42% compared to 2020. VOYA is a mid-cap stock, appropriate for growth and value investors and traders. The shares’ daily trading range appears to be ticking slightly upward. Strong Buy.
GROWTH & INCOME PORTFOLIO
Bristol-Myers Squibb Company (BMY) is a global biopharmaceutical company. Following its controversial acquisition of Celgene for $74 billion in November 2019, the merged company markets a long list of pharmaceuticals, including Revlimid, Eliquis and Opdivo, which treat cardiovascular, oncology and immunological diseases. The company expects revenue and profit growth to come from four areas: sales volume increases from current products, development and launch of new medicines, life cycle management and synergies from the Celgene acquisition. Bristol-Myers’ financial priorities include debt repayment, investment in innovation, share repurchases and annual dividend increases. Investors will want to be aware that the Celgene deal raised Bristol-Myers’ debt to over $46 billion – a manageable sum yet elevated compared to peers. Bristol-Myers was featured in the April issue of Cabot Undervalued Stocks Advisor.
The company reports earnings on August 6, with the consensus estimates parked at $1.48/share. Full year earnings are expected to increase by 32% and 20% in 2020 and 2021, respectively, in large part due to the benefits from the Celgene deal. Its 2020 P/E is a modest 9.3x, and 7.8x on next year’s estimate. BMY shares provide a generous 3.1% yield, well-covered by its enormous $13.5 billion in free cash flow this year.
The shares ticked down this past week. They have price and valuation support at around 55-56, and offer defensive traits during “risk-off” trading days, as well as the potential to ride some sentiment tailwinds surrounding the pharmaceutical sector in general. Strong Buy.
Broadcom (AVGO) is a global technology leader that designs, develops and supplies semiconductor and infrastructure software solutions that serve the world’s most successful companies. CFO Tom Krause expects to continue paying the dividend and paying down debt in 2020 (none of which is maturing this year), even under poor economic conditions. Share buybacks and M&A activity are on the back burner for now.
The company’s current quarter ends in July so it won’t likely report earnings until September. However, Apple is a 20% customer – their earnings report tomorrow (July 30) could directly affect AVGO shares.
Broadcom is an undervalued growth and income stock as well as a useful trading stock. Outside of the first quarter sell-down, the stock has remained in a range of roughly 270-320 for over a year. Full-year profits are expected to grow 1% and 12% in 2020 and 2021, respectively, and the 2020 P/E is 14.5x. Hold.
Dow Inc. (DOW) is a commodity chemicals company with manufacturing facilities in 31 countries. In 2017, Dow merged with DuPont to temporarily create DowDuPont, then split into three parts in 2019 based on the newly combined product lines. Today, Dow is the world’s largest producer of ethylene/polyethylene, which are the world’s most widely used plastics. Dow is primarily a cash-flow story driven by petrochemical prices, which often are correlated with oil prices and global growth, along with competitors’ production volumes. Dow was featured in our July edition of the Cabot Undervalued Stocks Advisor.
Dow’s second quarter earnings were satisfactory. Revenues fell 24% to $8.4 billion, a tad better than consensus estimates, with weakness across all four of Dow’s product groups. Volumes fell by 14% and pricing fell by 9%, reflecting sluggish global economic conditions that saw little demand for Dow’s commodity chemicals. The per share loss of $(0.26) was in line with estimates.
Cash flow was strong, as the company released cash tied up in working capital. Dow increased its 2020 cost-cutting program to $500 million and initiated a 2021 cost-cutting program of another $300 million. The company’s liquidity and balance sheet remain sturdy. The company maintained its dividend (now yielding 6.6%) and appears both committed and capable of retaining it. Dow will weather the downturn but its outlook is more subdued than we anticipated.
While the shares fell on the earnings report, they have nearly fully recovered their losses.
Analysts now expect full-year 2020 EPS of $0.72, much lower than the prior $1.04, reflecting the weaker outlook. The 2021 consensus is $2.08, down from $2.33. Valuation at 21.1x estimated 2021 earnings is becoming less meaningful as the recovery is not likely to fully arrive until 2022 or so. On estimated 2022 earnings, the shares trade at a more reasonable 16.8x, although this is two years away.
The high 6.6% dividend yield is particularly appealing for income-oriented investors. It has a small risk of a cut if the cycle remains subdued, although management makes a convincing case that the dividend will be sustained. Hold.
Total S.A. (TOT) based in France, is among the world’s largest integrated energy companies, with a global oil and natural gas production business, one of Europe’s largest oil refining/petrochemical operations, and a sizeable gasoline retail presence. The company is also expanding somewhat aggressively into renewable and power generation business lines, which may either be highly profitable or value-destructive. While low energy prices have hurt Total like all integrated producers, the company’s low production costs (management claims its costs are below $30/barrel), efficient operations and sturdy balance sheet position it well relative to its peers. Also, the company’s production growth profile may still be among the best in the industry despite sharp capital spending reductions.
Total remains attractive to income investors with its high 7.8% dividend yield that is likely to be maintained at least this year, even if they need to raise debt or trim assets to do so.
Total reports earnings tomorrow, July 30. In its “Main Indicators” release the other week, the company said that its price realizations (industry term for average price received) for its oil and gas, and its refining margins, remained weak. The most recent consensus estimates indicate full-year EPS of $1.24 and $2.77 in 2020 and 2021, respectively. The P/E multiple of 13.7x estimated 2021 earnings reflects only partial recovery toward normalized earnings of around $4.00. The shares remain rangebound. Value, growth and income investors should add to positions below 38. Hold.
BUY LOW OPPORTUNITIES PORTFOLIO
Columbia Sportswear (COLM) produces the highly recognizable Columbia brand outdoor and active lifestyle apparel and accessories, as well as SOREL, Mountain Hardware, and prAna products. For decades, the company was successfully led by the one-of-a-kind Gert Boyle, who passed away late last year. The Boyle family retains a 36% ownership stake and Gert’s son Timothy Boyle remains at the helm.
First-quarter sales fell 13% from a year ago, as 64% of sales are produced in the U.S., where its reliance on wholesale distribution, and the longer lockdown periods relative to other countries, hurt results. However, the company is rapidly improving its online operations, both through its own websites and through third-party online retailers, which combined generate over 20% of sales. Columbia’s balance sheet remains solid, with $707 million in cash and only $174 million in debt. The company is likely to remain healthy as consumers seek its highly relevant products.
Columbia’s shares have ticked up over the past week yet trade at the same price as they did in early 2018.
The company reports tomorrow, July 30, with analysts expecting an $(0.88)/share loss as the quarter includes the full effect of the stay-at-home orders. Full year estimates are $2.24 and $4.05 for 2020 and 2021, respectively. For comparison, the company earned $4.83/share in 2019. On next year’s estimates, the shares trade at a P/E of 20x. The stock has appeal for value investors and for growth investors with patience for what might be a slower recovery than other growth stocks. Traders will find COLM shares appealing given their sensitivity to consumer and economic re-opening trends. Buy.
General Motors (GM) under CEO Mary Barra (since 2014) has transformed from a lumbering giant to a well-run and (almost) respected auto maker. The company has smartly exited many chronically unprofitable geographies (notably Europe) and trimmed its passenger car roster while boosting its North American market share with increasingly competitive vehicles, particularly light trucks. We consider its electric and autonomous vehicle efforts to be near industry-leading. GM’s much-improved North America cost structure allows it to remain profitable at perhaps an 11 million vehicle industry volume. Its GM Credit operations are well-capitalized but will be tested in the pandemic. The shares will remain volatile based on today’s earnings report, the pace of the economic re-opening, U.S.-China relations, its successes in improving its relevance to Chinese consumers, and the size of credit losses in its GM Financial unit.
In GM’s earnings report released this morning, the company reported a $(0.50)/share adjusted loss that was vastly better than the consensus estimate for a loss of $(1.78)/share. Despite a 53% decline in revenues, operating profits were nearly break-even, reflecting the company’s aggressive cost-cutting efforts. GM remains fully-committed to investing in all-electric cars and other promising technologies. Much of the $(9) billion in negative cash flow in the automotive segment reflected the build-up of inventory as part of the production ramp-up. GM Financial’s credit metrics were steady. GM’s market share increased and dealer inventories are lean. The company’s liquidity and balance sheet remain healthy. Overall, an encouraging report. GM shares rose 4% in pre-market trading.
Current Wall Street estimates (not incorporating today’s earnings report) project EPS of $1.21 and $4.08 in 2020 and 2021, respectively. GM remains an attractive cyclical stock for investors and traders. Strong Buy.
Amazon.com (AMZN) remains nearly perfectly positioned for a pandemic world. Its to-your-doorstep shopping marketplace allows consumers to safely shop for just about anything without leaving their homes. As the world accelerates its transition to the digital world, the Amazon Web Services (AWS) cloud business will continue to produce vast and growing profits ($20 billion in operating profits next year, up 20% from the prior year and comprising nearly 65% of total company operating profits). Also, Amazon’s innovations and forays into new industries are disrupting established global businesses, including freight companies, retailers, entertainment and technology companies.
Amazon reports earnings after the close tomorrow (on July 30). Analysts expect per-share earnings of $1.62 for the quarter. We are watching revenue growth, particularly in the AWS cloud operations, growth in advertising revenues, growth in Prime membership and their e-commerce results.
For all of 2020, analysts expect earnings to fall from $23.01 in 2019 to $20.10 in 2020, then rise 94% to $39.00 in 2021. The decline in 2020 profits results from Amazon’s plans to spend much of its profits (essentially all of its second-quarter profits) on COVID-related expenses, including new hires and wage increases. AMZN shares ticked down to 3,055 from above 3,100 earlier, yet still have gained nearly 70% this year. This stock is clearly the iconic stock of its era. How long this will last is hard to say.
Investors may want to start trimming out of their Amazon positions, although for now we are maintaining our rating of Hold.
Equitable Holdings (EQH) owns two principal businesses: Equitable Financial Life Insurance Co. and a majority (65%) stake in AllianceBernstein Holdings L.P. (AB), a highly respected investment management and research firm.
Equitable, with a 161-year history, was acquired by French insurer AXA in 1992. Starting in 2018, AXA began to spin off Equitable with an initial public offering of part of its ownership. Part of the motivation behind the spinoff was to fund AXA’s $15 billion acquisition of insurer XL Group Ltd. Through subsequent stock sales, AXA currently owns less than 10% of Equitable. With its newfound independence, Equitable is free to pursue opportunities that it was unable to as a subsidiary of AXA.
The company is well-capitalized and has significant liquidity. Its diverse, high-quality investment portfolio is hedged against adverse changes in interest rates and equity markets. AllianceBernstein’s assets under management (AUM) as of June was $600 billion. While this year’s profits will decline about 13% due to higher mortality costs, they will like recover next year. Equitable expects to continue delivering a 50-60% payout ratio through dividends and share repurchases. The shares offer a 3.4% dividend yield.
Equitable reports earnings on August 6. Its majority-owned subsidiary AllianceBernstein reported encouraging results last week.
EQH shares are undervalued, with a 2020 P/E of 4.7x. Like many insurance companies, investors also value Equitable on a book value basis. With its $37.78 in per-share book value, EQH trades at 54% of book value, a significant discount. EQH shares also trade at their 20 IPO price, which was a disappointment at the time relative to the 24-27 price range that bankers had targeted. Since then Equitable has arguably become a better company and any sale of AllianceBernstein is likely to unlock further value. EHQ shares are appropriate for dividend investors, growth investors and traders. While the shares may trade in sync with the overall stock market, given its investment-driven operations, we see more upside than downside. Strong Buy.
Netflix (NFLX) is the world’s leading streaming entertainment service with 193 million paid subscribers in over 190 countries. Viewers can enjoy unlimited access to TV series, documentaries and feature films across a wide variety of genres and languages, all without commercial interruptions. The company is experiencing rapid international subscription growth and creating original foreign language content for international markets.
As discussed last week, we changed our recommendation to Retired.
NVIDIA (NVDA) is the pioneer and leading designer of graphics processing unit (GPU) chips, which initially were built into computers to improve video gaming quality. However, they were discovered to be nearly ideal for other uses that required immense and accelerated processing power, including data centers and artificial intelligence applications such as professional visualization, robotics and self-driving cars. In April, NVIDIA completed the $6.9 billion acquisition of Mellanox Technologies, an innovator in high-performance interconnect technology routinely used in supercomputers and hyperscale data centers. NVIDIA’s data center business now represents about 50% of total revenues.
NVIDIA is a high-P/E, aggressive growth/momentum stock. Its shares have increased 17x since the start of 2015 and now trade essentially at their all-time high. The pullback earlier this week still leaves the stock above where it was trading only 4 sessions ago. Yet, part of the reason behind the gains is that cloud-based computing is the biggest secular trend in technology, and the most powerful. No one knows how large the industry will ultimately become, but “larger than it is today” seems like the correct answer for many days and years into the future. Until this open-ended growth appears to peak, it would be difficult to bet against it. The only question for momentum investors is when to stop betting on it. The valuation of 42.1x estimated fiscal year 2022 earnings is high and on the edge of astronomical, particularly for a company its size.
Wall Street expects EPS to grow 21% in fiscal 2022 (January year-end) compared to fiscal 2021. The company reports its earnings in September. We’re reducing our rating to Buy on valuation, despite the impressive fundamentals. We are closer to moving to a “Retired” but are reluctant to move too quickly.
Marathon Petroleum (MPC) is a leading integrated downstream energy company and the nation’s largest energy refiner, with 16 refineries, a majority interest in midstream company MPLX LP, 10,000 miles of oil pipelines, and product sales in 11,700 retail stores.
Marathon may sell its Speedway retail gas station chain. Thus, the market is increasingly valuing Marathon’s shares as if this deal will be completed. Since neither a deal nor a price is a guaranteed outcome, the shares will sell at a discount to this value but higher than if there was no chance of a deal.
Using very rough numbers, we think the Speedway business might be worth $24/share and the rest of Marathon worth perhaps $17/share, for a total value to MPC shareholders of perhaps $41/share. There are many assumptions that could change these numbers. With MPC shares trading at about $38, this implies about 8% upside. While interesting and appealing, it is not enough to warrant a return to a Buy rating. Meanwhile, Marathon produces a reasonably sustainable 6.0% dividend yield.
The shares will continue to trade near-term around the pace of the re-opening of the economy, on overall oil prices and the currently wide refiner margins. Its earnings recovery appears to be slower in coming, reflected in declining earnings estimates.
Wall Street analysts are now forecasting a 2020 full-year loss of $(2.78)/share, continuing a trend downwards. Estimates for 2021 earnings also fell, now at $1.96/share. The company will report second quarter results on the morning of August 3.
Like most energy stocks, MPC offers a useful vehicle for traders: its economics are closely tied to oil prices yet the company has a more stable business, with its refining, MPLX midstream, and retail operations that dampen its volatility and provide more downside protection relative to pure exploration or energy service companies. Hold.
