Oil prices rose on Monday after Joe Biden came away from his talks in the middle-east without ensuring an increase in oil supply. Brent crude rose 2.6% to $103.88 per barrel on Monday. The OPEC+ cartel has seemingly kept a tight supply even as countries rush to fill the gap left in the wake of the Russia-Ukraine war.
Jeffrey Halley, a senior market analyst at OANDA, believes that the oil supply-demand imbalance remains as tight as ever, and prices would not go lower if OPEC+ does not raise its output.
Moreover, the proposed cap on Russian oil could backfire and raise oil prices to $140 per barrel, according to Gal Luft of the Institute for the Analysis of Global Security.
Given this backdrop, we think the fundamentally strong energy stocks Adams Resources & Energy, Inc. (AE) and Valero Energy Corporation (VLO) might be solid additions to one’s investment portfolio.
Adams Resources & Energy, Inc. (AE)
AE sells, transports, and engages in the terminaling and storing of various crude oil and natural gas basins. The company operates through its three broad segments: Crude Oil Marketing, Transportation and Storage; Tank truck Transportation of Liquid Chemicals, Pressurized Gasses, Asphalt, and Dry Bulk; and Pipeline Transportation, Terminaling, and Storage of Crude Oil.
In May, AE declared a quarterly dividend for the first quarter of 2022 of $0.24 per common share, which was payable to shareholders on June 17. This reflects upon the company’s cash generation ability.
For the first fiscal quarter that ended March 31, AE’s revenue increased 137.9% year-over-year to $774.25 million. Its operating earnings grew 111.6% from the prior-year quarter to $8.15 million. Net earnings improved 116.9% year-over-year to $6.09 million, while net earnings per common share increased 110.6% from its year-ago value to $1.39.
The consensus EPS estimate of $0.67 for the fiscal quarter ending September 2022 indicates an 86.1% year-over-year increase. Likewise, the consensus revenue estimate for the same quarter of $767.45 million reflects an improvement of 35.1% from the prior-year period.
The stock has gained 14.5% over the past year and 11.7% year-to-date to close its last trading session at $31.05.
AE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
AE has a Value and Momentum grade of A and a Sentiment and Quality grade of B. In the 97-stock Energy – Oil & Gas industry, it is ranked #1. The industry is rated B.
Click here to see the additional POWR Ratings for AE (Growth and Stability).
Valero Energy Corporation (VLO)
VLO operates internationally as a manufacturer and seller of transportation fuels and petrochemical products. Operating through the three broad segments of Refining; Renewable Diesel; and Ethanol, the company is involved in the oil and gas refining, marketing, and bulk selling activities.
In June 2022, VLO announced the reduction of its debt by approximately $300 million through the acquisition of $300 million of 4.00% Gulf Opportunity Zone Revenue Bonds Series 2010. This transaction, combined with previous transactions in the third and fourth quarters of 2021 and the first quarter of 2022, is said to have reduced the company’s debt by about $2.30 billion.
On April 28, VLO declared a quarterly dividend of $0.98 per share, which was payable to shareholders on June 7. This reflects upon the company’s ability to pay back its shareholders.
For the fiscal first quarter that ended March 31, VLO’s revenues increased 85.2% year-over-year to $38.54 billion. Adjusted net income, attributable to VLO stockholders and adjusted earnings per common share, came in at $944 million and $2.31, both registering a considerable increase over their negative year-ago values.
Street expects VLO’s revenue to come in at $47.92 billion for the quarter that ended June 2022, indicating an improvement of 72.7% from the prior-year period. Moreover, VLO has an impressive surprise earnings history, as it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 63.9% over the past year and 41.5% year-to-date to close its last trading session at $106.31.
It’s no surprise that VLO has an overall B rating, which translates to Buy in our POWR Ratings system.
VLO has an A grade for Momentum and a B for Growth and Quality. It is ranked #10 in the Energy – Oil & Gas industry.
In addition to the POWR Ratings grades we’ve stated above, one can see VLO ratings for Value, Stability, and Sentiment here.
AE shares were trading at $31.85 per share on Tuesday afternoon, up $0.80 (+2.58%). Year-to-date, AE has gained 16.10%, versus a -17.26% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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