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Goldman Sachs' Favorite Energy Stocks

- By Alberto Abaterusso

Goldman Sachs' (GS) outlook for the gas and oil industry is, in general, positive.

The U.S. global financial company highlights "pockets of upside" between the largest companies and refiners engaged in the oil and gas industry, Claudia Assis wrote last week in MarketWatch.


In its list of energy stocks Goldman Sachs picked the following:

  • Marathon Petroleum (MPC) for "underappreciated value across business lines," reports Market Watch.



    Marathon Petroleum, which refines, markets, retails and transports oil products mainly in the U.S., has a market cap of $26.4 billion and an EV/EBITDA ratio of 7.74.



    Marathon Petroleum is currently trading at $50.02 per share on the New York Stock Exchange with a price-earnings (P/E) ratio of 22.63 and a price-book (P/B) ratio of 1.95. The forward P/E ratio is 13.48, and the analysts' EPS estimate is $2.9 for 2017. The analysts' average target price per share is $61.74. The recommendation rating, which ranges between 1.0 (Strong Buy) and 5.0 (Sell), is 1.7.



    The company distributes an annual dividend of $1.44, through quarterly payments of 36 cents, for a dividend yield of 2.88%.
  • Valero Energy (VLO) for its dividend growth potential and as a "free cash flow winner," writes Market Watch. The independent oil refiner and producer of ethanol has a market cap of $9.42 billion and an EV/EBITDA ratio of 6.05.



    Valero Energy is currently trading at $65.57 per share on the New York Stock Exchange with a P/E ratio of 10.63, and a P/B ratio of 1.48. The forward P/E ratio is 10.63. For 2017, analysts forecast an EPS of $4.99. The analysts' average target price per share is $72.34. The recommendation rating is 2.2.



    The company distributes an annual dividend of $2.50, through quarterly payments of 62.5 cents, for a dividend yield of 3.81%.
  • Husky Energy (HUSKF). The company, engaged in the upstream and downstream segments of crude oil, bitumen, natural gas and natural gas liquids, is trading at $11.28 per share on the other OTC markets with a P/E ratio of 17.19 and a P/B ratio of 0.91. The company has a market capitalization of $11.63 billion. For 2017, analysts forecast that EPS (ttm) will grow 122.76% from the same figure of one year ago.
  • Chevron (CVX), because of its free cash flow, dividend yield and Permian Basin holdings, reports Market Watch.



    The U.S. global company engaged in integrated energy, chemicals and oil operations, has a market capitalization of $206.08 billion and an EV/EBITDA ratio of 18.35. Chevron is trading at $108.86 per share on the New York Stock Exchange with a P/E ratio of -403.19 and a P/B ratio of 1.41. The forward P/E ratio is 18.17, and the analysts' EPS estimate is $4.54 for 2017. The analysts' average target price per share is $126.64. The recommendation rating is 2.1.



    The company distributes an annual dividend of $4.32, through quarterly payments of $1.08, for a dividend yield of 3.97%.



Goldman Sachs also added Suncor Energy (SU) to its top picks' list as analysts rely on the energy company's new project's robust growth, dividend growth and valuation, writes Market Watch.

Suncor Energy has a market cap of $52.87 billion and an EV/EBITDA ratio of 12.11.

The energy stock is trading at $30.98 per share on the New York Stock Exchange with a P/E ratio of 154.90 and a P/B ratio of 1.56. The forward P/E ratio is 19.48, and the analysts' EPS estimate is $1.36 for 2017. The analysts' average target price per share is $36.68. The recommendation rating is 1.8.

The company distributes an annual dividend of 89.5 cents, through quarterly payments of 22.4 cents, for a dividend yield of 2.89%.

In addition, PBF Energy (PBF) is upgraded to Neutral from Sell by Goldman Sachs, while HollyFrontier (HFC) is downgraded to Sell from Neutral. PBF Energy has an analysts' average target price of $27.07 per share and a recommendation rating of 2.6. HollyFrontier has an analysts' average target price of $32.33 per share and a recommendation rating of 2.9.

Disclosure: I have no positions in any stock mentioned in this article.

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This article first appeared on GuruFocus.