This year has been a good one for U.S. equities. In the first five months of 2021, the S&P 500 was up 11.9%, while the Dow and the Nasdaq gained about 12.8% and 6.7%, respectively. In particular, the S&P 500 — regarded as one of the finest reflections of the stock market as a whole — not only maintained its northbound journey following a coronavirus-ravaged 2020, but also notched all-time closing highs on a few occasions.

On the sectoral front, it is Oil/Energy that has topped the S&P standings year to date. The space has significantly outperformed the market, with the Energy Select Sector SPDR — an assortment of the largest U.S. energy companies, popularly known by its ticker, XLE — hitting a new 52-week high on Friday, marking a more than 140% jump from its last year’s lockdown lows in March fueled by hopes of a faster demand recovery. To be precise, the energy index generated a total return of 47.1% in 2021 compared to the S&P 500’s 12.6%.

Energy: A Stunning Crash, Then an Incredible Rebound

Taking investors on a roller coaster ride, crude has made a stunning rebound — from the depths of minus $38 a barrel in April 2020 to reclaim a more than two and a half year high of $69.62 a barrel on Friday.

The commodity has spent much of the past few months trading higher on continued vaccine-related developments and their successful deployment around the world, offering hope of an earlier-than-expected pickup in demand. The OPEC+ cartel’s calibrated production policy has also driven up oil. In its recent meeting, member countries of the OPEC+ group — a coalition between OPEC countries under kingpin Saudi Arabia and non-members led by Russia — decided to gradually loosen the output cuts from May through July, reflecting their confidence in the fuel’s demand. Easing coronavirus infections, signs of robust demand in the world’s second-largest oil consumer, China, and the passage of the $1.9 trillion stimulus bill are the other positives in the oil story.

Sector to Likely Continue on a Lofty Path

Apart from vaccine breakthroughs, much of the positive argument is simply a bet on stronger economic growth in America and the subsequent improvement in consumer spending.

Following the epic meltdown in the second quarter of 2020, the U.S. GDP has rebounded strongly. With the fundamentals remaining strong, the economy is witnessing an impressive recovery since the beginning of 2021. In particular, the vaccination drive on a priority basis has helped to ramp up the level of activities. An improving job market and expectations of record-high corporate profits in 2021 are signaling the economy’s steady return to full health. The massive fiscal stimulus, which has started to take effect, should further bolster the economy.

Further, Americans have built up forced savings of around $2.3 trillion over the pandemic. This unprecedented level of excess personal accumulation, together with huge pent-up demand is expected to drive consumer spending in the near future. A 10.7% spike in first-quarter 2021 consumer spending is proof of the strong tailwind.

Against this positive economic backdrop, end-user fuel usage is expected to improve.

How to Tap the Oil Market’s Rally

While all oil-focused stocks stand to benefit from rising commodity prices, the upward revision of earnings per share (EPS) estimate for 2021 is a crucial indicator in identifying potential winners in the space. This simply means that the market is expecting the company to do good business this year. In particular, market participants are likely to be interested in those stocks that have witnessed positive EPS estimate revisions within the last 7 to 60 days.

We have narrowed down our search to five stocks that have witnessed robust earnings revisions in the last 7 to 60 days and have strong growth potential. Each of our picks carries a Zacks Rank #1 (Strong Buy).

Canadian Natural Resources Limited (CNQ - Free Report): This Canadian energy major boasts a diversified portfolio of crude oil (heavy as well as light), natural gas, bitumen and synthetic crude oil. Canadian Natural Resources raised its dividend by 11% in March, reflecting strength in its cash flows. The company is counted as a 'Canadian Dividend Aristocrat' with an attractive yield. What’s more, Canadian Natural Resources has a solid track record of dividend hikes, increasing payout for 21 consecutive years.

The company has an expected earnings growth rate of 752.08% for the current year. Over 30 days, Canadian Natural Resources has seen the Zacks Consensus Estimate for its 2021 earnings increase 17.2%.

Continental Resources (CLR - Free Report): Continental Resources has a premier position in the oil-heavy Bakken shale play. From 2019 to 2023, it expects oil equivalent production to see a compound annual growth rate of 8-10%. This will likely help Continental Resources generate an average annual free cash flow of $3.5-$4 billion over the five-year period. Notably, the company recently reported strong quarterly results owing to higher realizations of commodity prices and lower operating expenses. Further, the energy explorer recently reinstated its dividend payments, which offers certainty about the company's financial well-being.

Continental Resources has an expected earnings growth rate of 279.49% for the current year. Over 60 days, the company has seen the Zacks Consensus Estimate for its 2021 earnings improve 68%.

Petrobras (PBR - Free Report): Brazil's energy giant Petrobras is riding high on the back of its impressive portfolio, particularly in the country’s pre-salt reservoirs and projects to grow output by 2024. The company's cost containment efforts and ambitious divestment plans have been helping the firm to improve its credit ratings. Considering Brazil's huge pre-salt oil reserves, Petrobras is in an enviable position to maintain an impressive production growth profile for years to come.

Petrobras has an expected earnings growth rate of 274.42% for the current year. Over 60 days, the company has seen the Zacks Consensus Estimate for 2021 earnings improve 59.4%.

PDC Energy (PDCE - Free Report): PDC Energy is an independent exploration and production operator with the Wattenberg Field in Colorado being its chief operating region. Following the SRC Energy deal last year, PDC Energy has emerged as the second-largest oil producer in the DJ Basin to go with its existing Delaware acreage. The company has a favorable debt maturity profile with a $200 million convertible note in September 2021 being the only near-term due, while a disciplined approach to capital spending should boost free cash flow generation.

PDC Energy has an expected earnings growth rate of 123.65% for the current year. Over 60 days, the company has seen the Zacks Consensus Estimate for its 2021 earnings increase 34.3%.

Imperial Oil Limited (IMO - Free Report): Imperial Oil’s integrated business portfolio of upstream and downstream assets provides it with a high level of stability, reducing the risk profile of the company. Strong execution and ramped-up activities in Kearl, Cold Lake and Syncrude projects positions the company for solid production growth and is expected to augment its revenues and earnings going forward. Imperial Oil's strong balance sheet, ability to generate cash flow and a shareholder friendly policy are the other positives, apart from the majority holding by ExxonMobil (XOM - Free Report) .

Imperial Oil has an expected earnings growth rate of 347.56% for the current year. Over 60 days, the Canada-based company has seen the Zacks Consensus Estimate for its 2021 earnings improve 5.2%.