Crude to Keep Lifting Big Oil Stocks—Shop Carefully: Analysts
As the price of crude oil has surged in the last year, several big oil stocks have followed suit. The next quarter will likely deliver good news again for these stocks, said one analyst—while another suggested examining how companies react to oil's rise before investing in them.
"I think one of the things to keep in mind is next quarter, we're probably looking at good numbers once again," said Blake Fernandez, a research analyst for Integrated Oil and Independent Refiners.
Several of the big oil companies have posted big gains because of the rise in oil prices. So far this year, ConocoPhillips is up 34 percent, Exxon Mobil has risen 37 percent and Chevron has increased 40 percent.
"When I look at analyst expectations for crude prices, whether it be for WTI or Brent, I think they're well below spot [current] prices," Fernandez said.
He added that he expects upward revisions for analysts' third-quarter numbers, which would create a "nice uplift" for equities.
Fadel Gheit's View: Buy...Carefully
When deciding which oil companies to buy, investors should look at how companies react to oil's rise instead of merely purchasing any oil companies solely based on the rise, said Fadel Gheit, a managing director and senior analyst for Oppenheimer.
"It's the catalyst that's really going to move the stock—whether the company will increase production, will increase dividends," Gheit said. "You just don't buy the stock because oil and gas prices are moving higher. It's already priced in it. You look for a company that has a catalyst."
Gheit added that he thought ConocoPhillips was priced cheaply right now and could rise 20 percent in the next year.
Fernandez's stock picks for big oil were Exxon Mobil and Royal Dutch Shell . He said Shell was a standout from an operational standpoint and predicted growth upstream for the company between 2009 and 2012.
He said Exxon offered investors "very nice share repurchase" of about $5 billion per quarter, which adds up to 4 to 5 percent of the share base annually.
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Both Fadel Gheit and his family own stocks that he discussed.