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5 Top-Ranked Stocks to Buy as Oil Prices Hit 3-Year High

Swarup Gupta
Northern Trust (NTRS) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

On Wednesday, oil prices surged to peaks not witnessed since the end of 2014. The immediate trigger for this surge was a slump in U.S. crude inventories. Sector watchers also remained worried about whether lingering geopolitical tensions would lead to a drop in supplies from major oil exporting countries.

Meanwhile, reports emerged that Saudi officials were looking to push oil prices toward $80 per barrel ahead of the launch of the Aramco IPO. At the same time, demand at pumps is expected to jump over the next few weeks as summer driving season approaches. Adding oil stocks to your portfolios at this time looks like a smart option.

Slide in Inventories Helps U.S. Crude Smash $68-barrier

At the end of Wednesday, WTI crude closed 2.9% higher at $68.47. This was the first time since December 2014 that U.S. crude price ended above the $68 a barrel level. Meanwhile, Brent crude gained 2.7% to close at $73.48 a barrel, its best settlement since Nov 26, 2014. On the next day, OPEC had refused to arrest the decline in oil prices, a stance that it has reversed since then.

One of the immediate triggers for the surge in U.S. crude was a decline of 1.1 million barrels in U.S. crude oil inventories during the week ending Apr 13. Meanwhile, gasoline demand hit a record level of nearly 9.9 million barrels during the week, the highest level ever witnessed in April.  

Geopolitical Tensions Boost Crude Prices

Also fueling the rally in oil prices over the last few works are concerns that geopolitical tensions in the Middle East could disrupt crude supplies. The conflict in Syria had heightened after an air strike jointly conducted by the United States, France and the United Kingdom.

Rebel attacks by rebels from Yemen on Saudi Arabia have also served to heighten tensions. Meanwhile, industry watchers are waiting to see if the Trump administration decides to impose sanctions on Iran once again, post the May 12 deadline. Also, oil production in Venezuela remains crippled due to an ongoing economic crisis.

Our Choices

Some market watchers are characterizing the unexpected drop in U.S. crude inventories which boosted oil prices on Wednesday as a temporary phenomenon. But other factors are also working to boost oil prices higher. A high level of compliance with the OPEC production controls agreement and geopolitical tensions are working to ensure an uptrend in oil prices.

Further, with the summer driving season around the corner, prices at the pump are slated to rise substantially. Taking all these factors into account, it makes sense to pick select oil stocks at this point. However, picking winning stocks may be difficult.

This is where our VGM Score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score. 

We have narrowed down our search to the following stocks, each of which has a Zacks Rank #1 (Strong Buy) and a VGM score of B. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Flotek Industries, Inc. FTK develops and delivers prescriptive chemistry-based technology, including specialty chemicals, to clients in the oil and gas industries.

Flotek Industries’ projected growth rate for the current year is more than 100%.The Zacks Consensus Estimate for the current year has improved by 3.2% over the last 60 days.

Nine Energy Service, Inc. NINE provides onshore completion and production services to unconventional oil and gas resource development.

Nine Energy Service’s expected earnings growth for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved by 34.1% over the last 30 days.

Baytex Energy Corp. BTE acquires, develops and produces oil and natural gas in the Eagle Ford and the Western Canadian Sedimentary Basin.

Baytex Energy’s Zacks Consensus Estimate for the current year has improved by 3.3% over the last 30 days.

Mammoth Energy Services, Inc. TUSK is an integrated oilfield service company.

Mammoth Energy Services’ expected earnings growth for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved by 16.5% over the last 30 days.

CNOOC Limited CEO is a company that engages primarily in the exploration, development and production of crude oil and natural gas offshore China.

FTI Consulting has a VGM Score of B. The company has expected earnings growth of 80.8% for the current year. The Zacks Consensus Estimate for the current year has improved by 4.7% over the last 60 days.

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CNOOC Limited (CEO) : Free Stock Analysis Report
Baytex Energy Corp (BTE) : Free Stock Analysis Report
Flotek Industries, Inc. (FTK) : Free Stock Analysis Report
MAMMOOTH ENERGY (TUSK) : Free Stock Analysis Report
Nine Energy Service, Inc. (NINE) : Free Stock Analysis Report
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