4 Promising Stocks From The Prospering Oil Pipeline Industry

Improving Pipeline Demand: The price of crude oil is improving steadily. This is because the coronavirus vaccine will soon be rolled out in the United States in a massive scale, which can drastically boost fuel demand. Higher oil price will provide incentives to explorers and producers to gradually ramp up upstream activities. This in turn will boost demand for pipeline assets for transporting additional produced volumes of the commodity.

Zacks Industry Rank Indicates Encouraging Prospects

The Zacks Oil and Gas - Production & Pipelines is a 13-stock group within the broader Zacks Oil - Energy sector. The industry currently carries a Zacks Industry Rank #66, which places it in the top 26% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates impressive near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.  

Before we present a few stocks that you may want to consider, let’s take a look at the industry’s recent stock-market performance and valuation picture.

Industry Outperforms Sector But Lags S&P 500

The Zacks Oil and Gas - Production & Pipelines has outpaced the broader Zacks Oil - Energy Sector but lagged the Zacks S&P 500 composite over the past year.

The industry has lost 16.3% over this period as compared with the 26.1% decline of the broader sector. Notably, the S&P 500 has gained 15% over the same time frame.

One-Year Price Performance

Industry’s Current Valuation

On the basis of the trailing 12-month enterprise value-to EBITDA (EV/EBITDA) ratio, which is a commonly used multiple for valuing oil and gas production & pipeline stocks, the industry is currently trading at 10.33X, lower than the S&P 500’s 16.33X. It is, however, above the sector’s trailing-12-month EV/EBITDA of 4.99X.

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