The S&P energy sector took the lead Tuesday, advancing nearly 4%, as heavily weighted components
Chevron NYSE: CVX, Exxon Mobil NYSE: XOM and
ConocoPhillips NYSE: COP notched strong gains.
One factor behind the increase: West Texas Intermediate crude settled $2.29 higher Tuesday, bouncing back from losses in the previous two sessions.
So far this year, the energy sector is up 13.28%, making it the only S&P sector showing a positive return.
Despite the prominence of “big oil,” there are lesser-known or smaller companies from the sector that have also held up well despite the broad-market correction.
MPLX NYSE: MPLX has been finding support above its 50-day moving average in the past three weeks, and is outperforming more than 90% of other stocks. The stock has been less volatile than the broader market recently, with a beta of 0.88.
The Ohio-based company is a limited partnership with a market capitalization of $32.26 billion. It owns, operates, acquires and develops midstream energy infrastructure assets.
The company was formed by Marathon Petroleum Corporation NYSE: MPC which is engaged in the refining and marketing of petroleum products in the midwest.
MPLX focuses on gathering and processing energy assets in the Appalachian region, as well as refining. The company derives revenue through minimum-volume contracts, which help smooth the revenue stream.
Revenue growth slowed in 2020, but has risen year-over-year in the past three quarters. Earnings declined in 2020 but rebounded last year. When MPLX reports fourth-quarter results in early February, analysts expect earnings of $0.75 per share on revenue of $2.48 billion. Both would be increases over the year-earlier quarter.
Rattler Midstream NASDAQ: RTLR is currently forming a cup-with-handle base below a $12.66 buy point. This stock has also held nicely above its 50-day line as the wider market plummeted. Rattler is a small cap, with a market capitalization of just $1.8 billion.
The company owns, operates, acquires and develops midstream infrastructure assets to deliver crude oil and natural gas. It operates in the Midland and Delaware Basins of the Permian region. Like Marathon, this company was formed by a larger oil-and-gas producer; in this case, the parent company was Diamondback Energy NASDAQ: FANG.
Rattler has long-term contracts to provide services to Diamondback, so that’s a steady stream of revenue.
Like many other companies in the energy sector, Rattler saw earnings decline in 2020, then a rebound last year. The company is due to report its fourth-quarter and full-year results on February 23, with Wall Street eyeing earnings of $0.25 per share on revenue of $103.94 million. If the company meets or beats on the top-and-bottom lines, both would be gains over 2020’s fourth quarter.
Enterprise Products Partners NYSE: EPD has been forming a double-bottom base since June of 2021. The current buy point would be above the October 20 high of $24.76. While the stock retreated into the second leg down of the double bottom, its 50-day line pulled below its 200-day line.
Another buy indication would be the point at which the 50-day line crosses above the 200-day, but that does not appear to be something that will happen in the next few days.
At this point, the stock is 18% above its December 20 session low of $20.52. It advanced 2.28% in Tuesday’s session, while the S&P 500 finished lower on the day, despite advancing from intraday lows.
The company is acquiring Navitas Midstream from private equity firm Warburg Pincus for $3.25 billion in cash, with the deal expected to close before the end of this quarter. Navitas will add natural-gas gathering capabilities to Enterprise, and be an entry to the Midland gas processing business.
Enterprise is due to report its fourth quarter on February 1, with analysts expecting earnings of $0.55 per share on revenue of $10.05 billion. Both would be gains over the year-earlier quarter.
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