Returns of refining stocks
Refining stocks have recovered since January 2, 2019. Let’s review the returns of six refining companies since that date.
Valero is followed by Phillips 66 (PSX) and HollyFrontier (HFC), which have risen between 5% and 6% each. PBF Energy (PBF) has returned ~2% in the stated period. However, Delek US Holdings (DK) stock has fallen in the year.
Five out of the six refining stocks’ 10-day moving averages have crossed over their 30-day moving averages since January 2. Usually, this suggests short-term technical bullishness.
A rise in the broader equity market has supported refining stocks since January 2. The stocks have also likely risen in anticipation of their fourth-quarter earnings results. However, refining cracks and oil spreads continued to narrow in January.
Stocks’ positioning: Valuation and dividend yield
The current recovery in refining stocks has affected refining companies’ valuations and dividend yields. While their valuations have risen, their dividend yields have fallen. With the latest valuations and dividend yields, let’s evaluate the refining stocks mentioned above. We’ll also compare them in terms of their estimated earnings growth. Their earnings are expected to be released from this week onward.
Valero, Phillips 66, and PBF have above-average dividend yields. These three stocks also have above-average valuations. However, HollyFrontier, PBF Energy, and Delek had above-average growth estimates in 2018.
Overall, Phillips 66 stock seems well positioned with an above-average dividend yield and a high earnings growth estimate for 2018. However, the stock also has a high valuation. High-growth stock PBF Energy also has a high dividend yield. Marathon Petroleum has the highest return but a low dividend yield, a high valuation, and below-average growth. We’ll discuss all of these parameters in our individual stock discussions starting in the next article.
We’ll begin by taking a look at the stock with the highest rise year-to-date: Marathon Petroleum.