Energy

4 Big Oil and Gas Stocks Analysts Want You to Buy, but Sell 2 Others

Jon C. Ogg

Published: May 22, 2016 10:56 am

Last Updated: January 13, 2020 7:44 am

The week of May 20 ended with a very mixed bag in performance. The Nasdaq was up 1% and the Dow closed marginally in the red. Investors keep proving over and over that they are willing to buy the big dips. And the “sell in May and go away” seems to not be deterring some of the bargain hunters looking for value and long-term upside.

24/7 Wall St. reviews many key analyst upgrades and downgrades throughout the week — dozens a day and hundreds by the end of each week in total. There remains a huge interest in which oil and gas stocks now offer long-term upside for investors.

One problem many investors are having is that many oil and gas stocks have risen massively from their lows. Some may have even risen by too much. Investors need to keep in mind that many analysts in the oil patch did not adequately brace for the downside that was seen in 2015 and into the start of 2016. many analysts have also been late to change their negative bias in the run-up.

There were key analyst upgrades and positive calls in four oil and gas stocks this last week, and two big downgrades or tales of caution in the oil and gas sector. There were of course other analyst calls, many of which were reiterations with price target changes, but these were the ones which stood out above and beyond the other calls.

Stocks Analysts Say to Buy

Exxon Mobil Corp. (NYSE: XOM) was raised to Buy and the price target was set at $104 at Argus on May 18. Exxon Mobil closed at $89.53 ahead of the call, and Friday’s closing price was $89.74. The Argus upgrade reflects its diverse asset base, secure dividend, cost controls, and favorable valuation versus peers. Exxon Mobil’s consensus analyst price target is now under the current share price at $85.02 and has a 52-week range of $66.55 to $90.40 – with a 52-week high hit on Friday.

Halliburton Co. (NYSE: HAL) received not just one great analyst call for upside, but two this last week. As a reminder, its merger with Baker Hughes Inc. (NYSE: BHI) has now formally ended. Argus sees 25% upside here, maintaining its Buy rating but raising the target price to $48 from $38 in that call. Halliburton was also raised to Outperform from Market Perform and the price target was raised to $49 from $44 at FBR Capital Markets. Halliburton has a consensus analyst price target of $45.33 and has a 52-week range of $27.64 to $46.69.

Range Resources Corp. (NYSE: RRC) was raised to Outperform from Market Perform at Raymond James on May 17, which is after news of an acquisition it is making. Range Resources closed down 10% at $37.69 ahead of that call. Jefferies also spoke positively here, reiterating its Buy rating and $45 price target on Range Resources. Jefferies said:

The large equity component is de-leveraging to Range Resources, but looks accretive to CFPS due to improved access to NYMEX pricing. Weak local pricing and incremental NE evacuation capacity likely played a role in Range Resource’s desire to diversify.

Range Resources ended up closing at $40.38 on Friday. It has a consensus analyst price target of $44.09, 2% higher than the prior week, and it has a 52-week range of $19.21 to $59.88.

Tesoro Corp. (NYSE: TSO) was started with a Buy rating and was assigned a $100 price target at UBS on May 19. This was versus a prior closing bell price of $79.48, and Tesoro closed out the week at $79.09. Tesoro has a consensus analyst price target of $106.04 and has a 52-week range of $67.80 to $119.67.

Stocks Analysts Say to Sell

Marathon Petroleum Corp. (NYSE: MPC) was started with a Sell rating and was given a $34 price target at UBS on May 19. This call was versus a prior $36.74 closing price, and Marathon closed out the week at $36.63. Marathon has a consensus analyst price target of $50.94 and has a 52-week range of $29.24 to $60.38. Its market cap is still %19.9 billion.

Petroleo Brasileiro S.A. (NYSE: PBR), or Petrobras, was seen down this last week, dropping to $6.45 from the prior week’s close of $6.88. It was actually up at $7.15 at the start of the week, but you know they just can’t keep things straight down in Brazil these days. A new CEO announcement will help, but the heat remains on the nation.

The big analyst call came from Raymond James. This firm thinks that Petrobras should be avoided now, and they downgraded the official rating to Underperform from Market Perform. The firm thinks it is a pipe dream investors are buying now, and the 56% gain has not been on the fundamentals here. They fear about the $100+ billion in debt, which will make the debt hinder its ability to operate normally, even though Petrobras cannot operate normally as a state-run entity.

Elsewhere, Petrobras was maintained as Neutral at Merrill Lynch with a $7.50 price objective. Despite EBITDA being helped by better refining results and despite the potential sale of pipelines being near, the firm thinks that Petrobras’ underlying risks remain high.

Petrobras has a consensus analyst price target of $4.88 and has a 52-week range of $2.71 to $10.46.

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Here is the prior week’s oil and gas feature from analysts: the seven oil and gas stocks analysts said to buy for the week ending on May 13.