Goldman rates Marathon stock a Buy.
Andrew Sherman/Bloomberg
Oil refiners entered 2022 in strong shape, poised to benefit from a rebound in areas that have not fully recovered from the pandemic, like jet travel. The last week, however, has dimmed some of those hopes, as refiners’ stocks have slumped along with other parts of the market.
In the past week, the VanEck Oil Refiners ETF (ticker: CRAK) is down 7.6%.
If the economy slows down, refiners would be among the first areas in energy to get hurt, because they need petroleum demand in the broader economy to keep ramping up to sustain their earnings.
Goldman Sachs analyst Neil Mehta is positive on refiners in general, seeing “a more significant and sustained improvement in demand contributing to higher earnings,” but argues that the group will not rise in a uniform fashion in 2022. Investors need to be picky about where they put their money in this industry.
Goldman likes Marathon Petroleum (MPC), Phillips 66 (PSX) Delek (DK), and Par Pacific
(PARR), but has Sell ratings on Valero Energy (VLO) and CVR Energy (CVI).
The Buy-rated companies stand out for different reasons. Marathon is buying back shares at a rapid rate after the sale of its Speedway division and owns a majority stake in a midstream company called MPLX LP (MPLX) that Goldman expects to do well this year. Mehta doesn’t go into details on his case for Phillips, but considers it a “conviction list” pick with 13% upside.
Meanwhile, Delek makes a relatively high proportion of its revenue from products like jet fuel, and jet travel appears likely to make a comeback this year. Par Pacific also relies on jet fuel, which should help carry the stock in 2022.
Write to Avi Salzman at [email protected]
