Storage tanks at the Phillips 66 refinery in Rodeo, Calif. Refiners have not reaped the same benefits as oil producers in the past year.
Justin Sullivan/Getty Images
Energy stocks have been the top performers in the market this year, rising 42%, after leading all other sectors last year too. Rising oil and gas prices, and an overall shortage of supply have allowed producers to sell their products at a premium and pay off years of accumulated debts. For the foreseeable future, most will be able to pay out larger dividends and buy back stock.
But not every energy stock is rising with the same ferocity. In fact, a few are even falling.
The stocks that are lagging behind tend to be in industries within energy that don’t get quite as big a jump from higher overall prices. That includes pipeline companies that may be tied to longer-term contracts, and refiners whose performance depend more on margins than absolute price levels.
Barron’s screened for energy companies in the S&P 1500 with market caps of at least $3 billion that have trailed peers. We came up with three names:
Equitrans Midstream (ticker: ETRN) has struggled in part because a major project has hit setbacks. A federal appeals court called into question the approval of a section of a pipeline through the Appalachian Mountains called the Mountain Valley Pipeline that is part-owned by Equitrans. The company says it remains “committed to completing the project” but has pushed back its timeline for the pipeline to go in service. It’s the largest company in the index to be trading in negative territory this year. The stock was recently at $8.42, down 18.4% year to date.
DT Midstream (DTM), which was spun off last year from utility DTE Energy (DTE), owns and operates natural gas pipelines and storage systems. DT Midstream has committed to reduce its carbon emissions by 30% in the next decade, and recently signed hydrogen and carbon capture deals. The stock was down 2.3% on Monday, at $53.65, up 11.8% for the year.
Phillips 66 (PSX) is one of the country’s largest refining companies. Refiners have not reaped the same benefits as oil producers in the past year, but some analysts expect that gap to close in the coming months. U.S. refineries are in a good spot today, because they run their operations on cheaper natural gas than their European counterparts, and their margins should rise. The stock was trading at $82.69 on Monday, down 1.4%. It is up 14% year to date.
In a recent note, J.P. Morgan analyst Phil Gresh wrote that the company should see big benefits from those rising margins in the second quarter and he sees growing demand for gasoline ahead too. His price target for the stock is $98, 19% above current prices.
Energy Laggards
These energy stocks have trailed the rest of the sector
| Company / Ticker | Price | Market cap (B) | Year-to-Date Price Change | Dividend Yield |
|---|---|---|---|---|
| Equitrans Midstream / ETRN | $8.45 | 4 | -18.4% | 7.2% |
| DT Midstream / DTM | 54.01 | 5 | 14.5 | 4.8 |
| Phillips 66 / PSX | 83.1 | 40 | 15.7 | 4.4 |
Source: Factset
Write to Avi Salzman at [email protected]
