Energy stocks have been benefiting due to bullish investors’ sentiments around this sector. Hence, oil and gas stock Marathon Petroleum (MPC) which was recently upgraded in our proprietary rating system, might be a solid buy. However, the progress in the clean energy sector is slow. Despite higher spending, net-zero might take some time to materialize. Hence, we think the downgraded solar stock FTC Solar (FTCI) might be best avoided. Read on to learn more.
The U.S. energy sector jobs grew by more than 300,000 in 2021, which indicates a 4% increase to more than 7.80 million, while job growth across all industries rose by 2.8%.
The bullish investors’ sentiments on the energy sector are reflected by the Energy Select Sector SPDR Fund (XLE), gaining 30.8% year-to-date, while the broader SPDR S&P 500 ETF Trust (SPY) declined 19.7% this year.
Moreover, the oil market remains tight as output from ten members of OPEC fell 100,000 barrels per day (bpd) to 28.52 million bpd. On top of it, oil prices reversed losses on Monday amid tight supply concerns.
Hence, the fundamentally strong energy stock Marathon Petroleum Corporation (MPC), which was recently upgraded from a B (Buy) to an A (Strong Buy) in our proprietary POWR Ratings system, might be a solid buy.
On the other hand, the International Energy Agency (IEA) believes that despite higher spending on clean technologies, the world is not on track to achieve net-zero emissions by 2050. Hence, we think the energy stock FTC Solar, Inc. (FTCI) might be avoided now. The stock was downgraded from a D (Sell) to an F (Strong Sell) in our rating system.
Stock to Buy:
Marathon Petroleum Corporation (MPC)
MPC operates as a refining, marketing, retailing, and transportation company of petroleum products, primarily in the United States. The company operates through the two broad segments of Refining & Marketing and Midstream.
On April 27, MPC declared a dividend of $0.58 per share on its common stock, which was payable to shareholders on June 10. This reflects upon the company’s ability of cash generation and shareholder returns.
For the fiscal first quarter ended March 31, MPC’s total revenues and other income increased 67.7% year-over-year to $38.38 billion. Net income attributable to MPC and net income per share came in at $845 million and $1.49, up substantially from their negative year-ago values.
The consensus EPS estimate of $5.54 for the quarter ended June 2022 indicates a 726.9% year-over-year increase. Likewise, the consensus revenue estimate for the same quarter of $42.96 billion reflects an improvement of 44% from the prior-year quarter. Moreover, MPC has an impressive surprise earnings history, as it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 38.3% over the past year and 32% year-to-date to close its last trading session at $84.48.
MPC’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.
MPC has a Growth and Momentum grade of A and a Quality grade of B. In the 99-stock Energy – Oil & Gas industry, it is ranked #6. The industry is rated B.
Click here to see the additional POWR Ratings for MPC (Value, Stability, and Sentiment).
Stock to Avoid:
FTC Solar, Inc. (FTCI)
FTCI is a solar tracker system, technology, software, and engineering services provider. The company’s offerings include two-panel in-portrait single-axis tracker solutions and SunPath, a software solution to enhance energy production.
On June 14, FTCI announced the closing of its acquisition of HX Tracker, a China-based supplier of 1P tracker systems. This is expected to accelerate the company’s international expansion. However, the gains from this acquisition might be stretched over a long period.
FTCI’s revenue decreased 24.6% year-over-year to $49.55 million in the fiscal first quarter ended March 31. Non-GAAP net loss and non-GAAP loss per share rose 203.8% and 100% from the prior-year period to $20.28 million and $0.20.
Street revenue estimates for the quarter ended June 2022 and the fiscal year 2022 of $32.85 million and $218.46 million indicate 25.6% and19.2% year-over-year declines, respectively.
Over the past year, the stock has declined 70.6% and 50.5% year-to-date to close its last trading session at $3.74.
The bleak prospects are reflected in FTCI’s POWR Ratings. The stock’s overall F rating translates to Strong Sell in our proprietary rating system.
FTCI has an F grade for Stability and Quality and a D for Value. It is ranked #13 out of the 18 stocks in the Solar industry. The industry is rated F.
In addition to the POWR Rating grades we’ve stated above, one can see FTCI ratings for Growth, Momentum, and Sentiment here.
MPC shares were trading at $84.48 per share on Monday morning, up $2.27 (+2.76%). Year-to-date, MPC has gained 33.80%, versus a -19.14% 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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