The energy sector has been one of the top performers this year. The Energy Select Sector SPDR Fund (XLE) has gained 56.1% over the past year, compared to the SPDR S&P 500 ETF Trust’s (SPY) 19.7% decline over the same period.

Moreover, analysts are bullish on the energy sector. 63% of FactSet analysts are optimistic about the energy industry, the highest of all industries, in terms of their ratings on stocks in the S&P 500.

Meanwhile, as China recovers from COVID-19, the country’s crude oil demand could rise to 15.7 million barrels daily next year, indicating a 700,000-bpd increase over 2022. According to Daniel Yergin, vice chairman of S&P Global, this could raise crude prices to $121 per barrel in the near term.

Against this backdrop, it could be wise to add fundamentally strong energy stocks Marathon Petroleum Corporation (MPC), Berry Corporation (BRY), and Adams Resources & Energy, Inc. (AE) to your portfolio for 2023.

Marathon Petroleum Corporation (MPC)

MPC operates as an integrated downstream energy company, mainly in the United States. It operates through its two broad segments of Refining & Marketing and Midstream.

In December, MPC declared that six of its refineries, along with its San Antonio office building, had received 2022 ENERGY STAR efficiency certifications from the U.S. Environmental Protection Agency (EPA). The EPA recognition might benefit the company.

In November, MPC declared a dividend of $0.75 per share on the common stock, reflecting an increase of approximately 30% over its previous dividend. The dividend was payable to shareholders on December 12. This reflects the shareholder return ability of the company.

MPC’s total revenues and other income rose 44.8% year-over-year to $47.24 billion for the fiscal third quarter that ended September 30. The company’s adjusted net income increased 731.3% year-over-year to $3.86 billion, while its adjusted EPS grew 969.9% from the prior-year quarter to $7.81. Also, its adjusted EBITDA came in at $6.83 billion, up 182.9% year-over-year.

For the fiscal fourth quarter (ending December 31, 2022), analysts expect MPC’s revenue and EPS to increase 16.1% and 328.9% year-over-year to $41.35 billion and $5.58, respectively. In addition, it surpassed the EPS and revenue estimates in each of the trailing four quarters.

MPC’s shares have gained 17.7% over the past three months and 37.5% over the past six months to close the last trading session at $116.18.

MPC’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has an A grade for Momentum and Quality and a B for Growth. In the 93-stock B-rated Energy – Oil & Gas industry, MPC is ranked #6.

To see additional POWR Ratings for Value, Stability, and Sentiment for MPC, click here.

Berry Corporation (BRY)

BRY is an independent upstream energy company that develops and produces conventional oil reserves in the western United States. It operates in two segments, Development and Production; and Well Servicing and Abandonment.

On November 2, the company’s board of directors declared a dividend totaling $0.47 per share on its outstanding common stock. The variable and fixed portion of the dividends were payable to shareholders on November 28. This reflects on BRY’s cash generation ability.

In terms of forward non-GAAP P/E, BRY is trading at 4.09x, 47.9% lower than the industry average of 7.85x. Its forward EV/Sales multiple of 1.29 is 27.5% lower than the industry average of 1.78.

BRY’s total revenues and other came in at $376.45 million for the third quarter that ended September 30, up 162.5% year-over-year. Its adjusted net income came in at $45.52 million, up 294.5% year-over-year. Also, its earnings per share on adjusted net income came in at $0.55, up 292.9% year-over-year.

BRY’s revenue is expected to increase 37.6% year-over-year to $749.75 million in the fiscal year ending December 2022. Its EPS is expected to grow 675.2% year-over-year to $1.94 in the same period. BRY has topped Street EPS and revenue estimates in three out of the trailing four quarters, which is impressive.

BRY’s shares have gained 4.8% over the past three months to close the last trading session at $8.02. It has also gained 2.8% over the past six months.

BRY’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to Buy in our proprietary rating system.

It has an A grade for Value and Momentum and a B for Growth. It is ranked #5 in the same industry.

Click here to see BRY’s additional POWR Ratings for Stability, Sentiment, and Quality.

Adams Resources & Energy, Inc. (AE)

AE markets, transports, and stores various U.S. crude oil and natural gas basins. The company has three operational segments: Crude Oil Marketing, Transportation, and Storage; Tank truck Transportation of Liquid Chemicals, Pressurized Gases, Asphalt, and Dry Bulk; and Pipeline Transportation, Terminalling, and Storage of Crude Oil.

On November 10, AE declared a quarterly cash dividend for the third quarter of 2022 of $0.24 per common share, which was payable on December 16.  The company has consistently paid a dividend since 1994. This reflects the shareholder return ability of the company.

On November 1, AE announced the repurchase of all of the shares of Adams common stock owned by KSA Industries, Inc. The total purchase price was approximately $70 million or $36 per share and is expected to be funded by a combination of existing cash on hand and a new term loan.

Along with the company’s recent acquisitions, repurchasing of shares is expected to enhance the value for all remaining shareholders. Kevin Roycraft, Chief Executive Officer of the company, said, “The company will also see an immediate annual savings of roughly $1.9 million in dividend payments at the current dividend rate.”

For the fiscal third quarter ended September 30, AE’s total revenues increased 50.1% year-over-year to $852.90 million. Its operating earnings grew 30.1% from the prior-year quarter to $2.99 million, while its net earnings grew 41.7% from its year-ago value to $2.19 million. The company’s net earnings per common share improved by 38.9% from its year-ago value of $0.50.

The consensus EPS estimate of $3.37 for the fiscal year ending December 2022 represents a 22.6% improvement year-over-year. Revenue is expected to come in at $3.46 billion.

The stock has gained 21.2% over the past six months and 31.2% over the past three months to close the last trading session at $39.27.

AE’s POWR Ratings reflect its promising prospects. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

The stock also has an A grade for Momentum and Sentiment and a B for Value and Quality. Within the same industry, it is ranked #3.

Click here to see additional POWR Ratings for AE (Stability and Growth).

MPC shares were trading at $116.42 per share on Friday afternoon, up $0.24 (+0.21%). Year-to-date, MPC has gained 86.67%, versus a -18.62% rise in the benchmark S&P 500 index during the same period.

The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.

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