Oil stocks, though powerfully relevant even in the age of new-energy vehicles, have presented a difficult narrative. With the rise of electric vehicles, consumers actually have choices now that extend beyond the hydrocarbon paradigm. Also, scientific concerns such as climate change have impacted the ideological discourse. Nevertheless, a possible pivot in the political realm may invigorate fossil fuels.
At the beginning of last week, President Joe Biden shocked the nation – indeed the world – by announcing that he will not seek reelection. Instead, he will focus on carrying out his term in office. This decision came about thanks to former President Donald Trump riding a wave of momentum following his flawed (but comparatively superior) debate performance.
It’s true that Democrats are energized, with Vice President Kamala Harris gaining Biden’s endorsement. Also, Trump is now the oldest candidate in the race. Still, he would seem to have the most straightforward path to the White House. Combined with Republicans’ penchant for support hydrocarbon enterprises, that could benefit the below oil stocks.
EOG Resources (EOG)
Operating in the exploration and production component of the hydrocarbon value chain – also known as upstream – EOG Resources (NYSE:EOG) is involved in the development and marketing of crude oil, natural gas liquids (NGLs) and natural gas. Fundamentally, Donald Trump’s stated ambitions of rolling back President Biden’s electric-vehicle-related mandates could be a cynical boon for EOG stock.
Admittedly, EOG stock is on the pricier side of the spectrum. Currently, shares trade hands at 3.15X trailing-year sales. That’s above the sector average of 2.12X. In addition, the period between the first quarter of 2023 to Q1 2024 saw a valuation of 2.76X. At the same time, the market appears comfortable supporting a multiple roughly around the 3X level.
To be sure, analysts’ consensus view for fiscal 2024 sales calls for a 2.4% decline. Here’s the thing, though: with the political winds shifting, it’s quite possible that these projections need to be upwardly revised. The high-side estimate calls for $25.76 billion at the moment, which seems light. I’d keep close tabs on EOG as one of the oil stocks to watch.
ConocoPhillips (COP)
One of the powerhouses among oil stocks, ConocoPhillips (NYSE:COP) primarily occupies the upstream component of the value chain. Per its public profile, ConocoPhillips products, transports and markets crude oil along with other products. These include bitumen, natural gas, liquefied natural gas (LNG) and NGLs. Again, thanks to political shifts, COP stock appears awfully intriguing.
It’s not just the domestic realm either. When you broaden out to the geopolitical front, tensions and flashpoints in the Middle East and Eastern Europe can easily lead to global supply chain disruptions. If that happens, upstream enterprises – and their underlying products – will likely see even greater demand. So, this dynamic must be taken into context.
Yes, COP stock trades at a premium to the industry at 2.4X sales. However, for what the company brings to the table, it seems quite reasonable. Overall, analysts anticipate fiscal 2024 sales to reach $59.36 billion, up 1.3% from last year.
However, the high-side estimate of $68.56 billion seems much more realistic given the shifting tides. Thus, COP is one of the oil stocks to keep on your radar.
TC Energy (TRP)
Operating in the midstream segment of the value chain, TC Energy (NYSE:TRP) specializes primarily in energy infrastructure. That means it focuses on storage and transportation services. Notably, the company has build and operates a network of 93,600 kilometers (about 58,160 miles) of natural gas pipelines. It also has a network of pipelines that funnel crude oil to various locations.
Midstream operators like TC Energy tend to be the most stable of oil stocks. Generally speaking, the companies in the sphere ink long-term contracts. Plus, infrastructure serves myriad needs, from commercial to industrial down to personal. As well, midstream operators are crucial for the proper running of the economy.
To be fair, one drawback about TRP stock is that it trades at 3.69X trailing-year revenue. That’s steep compared to the industry average of 1.87X. However, in the past year, the market has supported a multiple of 3.39X. So, it’s not too bad, realistically speaking.
For the next two years, analysts project slow-and-steady growth. By the end of fiscal 2025, revenue might land at $12.45 billion. That’s up 5.2% from 2024’s projected sales of $11.83 billion. In 2023, the company posted a top line of $11.65 billion.
Kinder Morgan (KMI)
One of the top oil stocks in the midstream segment, Kinder Morgan (NYSE:KMI) offers many advantages to investors. For one thing, much like TC Energy, Kinder Morgan is structured as a corporation. Therefore, you don’t have to deal with the Mickey Mouse nonsense of pass-through income and K-1 tax documents. In my opinion, it’s best to keep your life as simple and straightforward as possible.
Another thing to consider is the business itself. Kinder Morgan operates a vast infrastructural network of pipeline and storage systems. It’s also involved in processing and treatment facilities, making it an invaluable economic resource. Because of the relevance and everyday utility of the business, KMI is predictable. That predictability leads to a forward dividend yield of 5.38%.
Hey, with the Federal Reserve strongly hinting at interest rate cuts, that dividend might come in handy. Now, it’s not cheap, trading at 3.09X sales. However, the market has supported a multiple of 2.46X in the prior year. So, it’s not too terrible.
Analysts see fiscal 2024 sales rising to $16.29 billion, up 7.5%. Fiscal 2025 sales could rise again to $17.52 billion. These are great numbers, making KMI one of the oil stocks to consider.
Valero Energy (VLO)
Moving into the more volatile but exciting component of the value chain, Valero Energy (NYSE:VLO) specializes in the field of refining and marketing. Also known as downstream, Valero deals with the segment of the business with which most people are familiar. Basically, if the product goes into your tank, you’re dealing with a downstream business.
Because of the consumer-facing narrative, VLO and oil stocks like it can be tricky to call. As fuel prices go up, people and enterprises are less incentivized to move about. Further, with alternatives such as EVs in the mix, people have options. Still, with a possible second Trump administration on the horizon, the promised EV rollbacks could hurt incentivization programs.
That might stymie sales, leading to more demand for combustion-based vehicles. Cynically, that would likely benefit VLO stock. It’s also worth noting that shares trade hands for only 0.38X sales. In contrast, the average for the sector stands at 0.55X.
Now, analysts see a 6.2% reduction in sales for fiscal 2024 to $135.72 billion. However, this framework could shift positively if Trump takes over.
Marathon Petroleum (MPC)
Another downstream enterprise, Marathon Petroleum (NYSE:MPC) operates as an integrated downstream energy firm. While it primarily focuses on the refining and marketing segment of the value chain, Marathon also offers relevancies in the midstream category. That affords a level of balance for the enterprise. Still, a political shift may do wonders for MPC stock.
Right now, shares trade hands at 0.46X sales. That’s lower than the sector average, as mentioned earlier. In addition, it’s about in line with the prior year’s metric of 0.43X. However, the context is that like other oil stocks in the downstream segment, analysts aren’t exactly optimistic about the future. In particular, they believe that fiscal 2024 sales could slip to $139.98 billion. That would be down 6.9% from last year.
Also, fiscal 2025 sales may slip again to $136.85 billion. However, on the other side of the coin, the most optimistic view calls for 2024 sales to hit $153.21 billion and $160 billion one year later. These targets seem likelier, especially if domestic politics and geopolitics move in a cynically favorable direction.
Schlumberger (SLB)
Finally, we’ll end this list of oil stocks that fall outside the realm of the core hydrocarbon value chain with Schlumberger (NYSE:SLB). Operating in the equipment and services industry, Schlumberger provides technology for the energy industry worldwide. Primarily, the company is involved in field development and hydrocarbon production management. As well, it offers expertise in data-processing services for exploration projects.
I wouldn’t classify the enterprise as financially remarkable. Rather, it gets the job done. For example, in the past year since Q2, Schlumberger posted an average EPS of 79 cents. This beat the consensus view calling for 78 cents, yielding an earnings surprise of 1.55%. Yes, it’s modest but it’s still a beat.
To be fair, SLB stock trades at 2.01X sales. That’s quite high compared to the sector average 1.22X. That said, the market previously accepted a one-year average multiple of 2.36X. So, it’s not bad valuation wise.
Finally, analysts believe that fiscal 2024 sales may rise to $36.94 billion. That’s up 11.5% from last year. And in 2025, revenue could jump to $41.92 billion. This is easily one of the oil stocks to keep on your watchlist.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
