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Moving Averages and Analysts’ Estimates for Downstream Companies

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Nov. 9 2015, Published 8:56 a.m. ET

Are downstream companies in an uptrend?

Overall, the four large-cap (large capitalization) downstream companies are trading well above their respective 100-day and 20-day moving averages.

The stock prices of Phillips 66 (PSX), Valero Energy (VLO), Tesoro (TSO), and Marathon Petroleum (MPC) are around 14.6%, 13.3%, 15.7%, and 9.3%, respectively, above their 100-day moving averages, whereas the Energy Select SPDR ETF (XLE) is trading above its 100-day and 20-day moving averages by about 2%.

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Moving averages are lagging indicators that are used to confirm the existing trend. When an underlying asset price is above its longer and shorter term averages, then it’s in an uptrend and vice-versa. Moving averages provide important supports and resistance points for the movements of underlying assets.

The table above illustrates the moving averages, returns, and forward target prices of Phillips, Valero, Tesoro, and Marathon.

Analysts’ estimates

Among the four refineries, Marathon Petroleum has the highest upside target of about 18.5% from current levels for the next 12 months, as per Wall Street analysts’ estimates. The estimates indicate quarter-over-quarter EPS growth rates of about -51%, -5%, 91%, and -9% for the stock in 4Q15, 1Q16, 2Q16, and 3Q16, respectively.

The upside targets for Phillips 66, Valero Energy, and Tesoro are about 3%, 9%, and 6.5%, respectively, from current prices.

In the next article, we’ll take a look at these four downstream companies’ earnings and volatility.

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