4 Refining & Marketing Stocks Gaining From Industry Tailwinds

Industry Overview

The Zacks Oil and Gas - Refining & Marketing industry consists of companies involved in selling refined petroleum products (including heating oil, gasoline, jet fuel, residual oil, etc.) and a plethora of non-energy materials (like asphalt, road salt, clay and gypsum). Some companies also operate refined product terminals, storage facilities and transportation services. The primary activity of these firms involves buying crude/other feedstocks and processing them into a wide variety of refined products. Refining margins are extremely volatile and generally reflect the state of petroleum product inventories, demand for refined products, imports, regional differences and capacity utilization in the industry. Other major determinants of refining profitability are the light/heavy and sweet/sour spreads. Refiners are also prone to unplanned outages.

4 Trends Defining the Oil and Gas - Refining & Marketing Industry's Future

Strong Global Product Demand Supports Throughput: Refiners are still seeing healthy demand for transportation fuels like gasoline, diesel, and jet fuel, even though the broader economy is sending mixed signals. Jet fuel use is rising, freight activity has held up, and seasonal gasoline demand remains solid. This has allowed refiners to keep their facilities running efficiently and adjust their output to the most profitable products. With many global markets lacking enough refined fuel, export demand is helping offset any regional slowdown and continues to support strong refining margins across different market conditions.

Persistent Structural Tightness in Refining Capacity: Global refining capacity remains tight, and that’s unlikely to change anytime soon. After years of low investment, tougher regulations, and project delays, very little new capacity has been added. Meanwhile, many older refineries have shut down, widening the gap between available capacity and the growing demand for refined fuels — especially in export-driven markets. With so little new supply coming online, crack spreads stay strong. This long-term tightness gives refiners more pricing power and helps support steadier, more reliable margins across the industry.

Margin Volatility and Rising Operating Costs: Even in strong markets, refining remains highly sensitive to margin swings. Crude prices can shift quickly, product balances often change with little warning, and global demand patterns are inconsistent, all of which can squeeze refining spreads. Feedstock costs have become harder to predict, and transportation delays frequently disrupt regional pricing. At the same time, inflation keeps pushing operating expenses higher — from labor and utilities to maintenance and regulatory compliance. These pressures reduce earnings visibility. For refiners with less flexible systems or limited export exposure, staying profitable during weaker cycles becomes much more challenging.

Growing Opportunities in Renewable Fuels: A major long-term opportunity for refiners is the shift toward renewable diesel, sustainable aviation fuel and other low-carbon fuels. Government incentives and stricter emissions rules are boosting demand for these cleaner products. Companies that can convert parts of their existing refineries or blend renewable feedstocks gain several advantages: more diverse revenue, easier regulatory compliance, and access to valuable environmental credits. These upgrades often improve reliability and modernize operations as well. Over time, renewable fuel investments can help create more stable earnings that support — rather than replace — traditional refining profits.

Zacks Industry Rank Indicates Positive Outlook

The Zacks Oil and Gas - Refining & Marketing is a 16-stock group within the broader Zacks Oil - Energy sector. The industry currently carries a Zacks Industry Rank #90, which places it in the top 37% of 243 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates fairly strong 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.

Considering the encouraging dynamics of the industry, we will present a few stocks that you may want to consider for your portfolio. But it’s worth taking a look at the industry’s shareholder returns and current valuation first.

Industry Outperforms Sector but Lags S&P 500

The Zacks Oil and Gas - Refining & Marketing industry has fared better than the broader Zacks Oil - Energy Sector, though it has underperformed the Zacks S&P 500 composite over the past year.

The industry has gone up 9% over this period compared with the broader sector’s increase of 1.4%. Meanwhile, the S&P 500 has gained 16.4%.

One-Year Price Performance

Industry's Current Valuation

Since oil and gas companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio. This is because the valuation metric takes into account not just equity but also the level of debt. For capital-intensive companies, EV/EBITDA is a better valuation metric because it is not influenced by changing capital structures and ignores the effect of noncash expenses.

On the basis of the trailing 12-month enterprise value-to EBITDA (EV/EBITDA), the industry is currently trading at 4.62X, significantly lower than the S&P 500’s 18.25X. It is also below the sector’s trailing 12-month EV/EBITDA of 5.27X.

Over the past five years, the industry has traded as high as 6.91X and as low as 1.77X, with a median of 3.61X, as the chart below shows.

Trailing 12-Month Enterprise Value-to-EBITDA (EV/EBITDA) Ratio (Past Five Years)

4 Stocks in Focus

Par Pacific Holdings: Houston-based Par Pacific runs an integrated energy business that includes refining, retail, and logistics operations. The Zacks Rank #1 (Strong Buy) company has 219,000 barrels per day of refining capacity, a broad network of storage and transport assets, and more than 100 fuel and convenience stores serving major western U.S. markets. Alongside its traditional fuel operations, Par Pacific is also pursuing decarbonization efforts and maintains a meaningful stake in natural gas production. Together, these pieces give the company a mix of steady cash-flow support and long-term growth potential.

You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for 2025 earnings of Par Pacific indicates 1,724.3% surge. It has a market capitalization of $2.2 billion. Over the past 60 days, the Zacks Consensus Estimate for the company’s 2025 earnings has more than doubled. Shares of PARR have jumped 146.2% in a year.

Price and Consensus: PARR

Marathon Petroleum: It is a major independent refiner, transporter and marketer of petroleum products. Marathon Petroleum benefits from access to lower-cost crude sourced from the Permian, Bakken, and Canada, which supports strong margins. The Zacks Rank #3 (Hold) company’s powerful cash flow generation, paired with its consistent and sizable shareholder returns, remains a central factor driving investor confidence and supporting the stock’s long-term upside.

Findlay, OH-based Marathon Petroleum has a market capitalization of more than $60 billion. MPC beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed in the other. Over the past 60 days, the Zacks Consensus Estimate for Marathon Petroleum’s 2025 earnings has moved up 26.9%. Shares of MPC have gained 25% in a year.

Price and Consensus: MPC

Phillips 66: Headquartered in Houston, TX, Phillips 66 is among the world’s largest independent refiners and operates as a broad-based energy company. Its businesses range across refining, marketing, midstream operations, and petrochemicals, supported by nearly 2 million barrels per day of refining capacity in the United States and Europe. The company distributes fuels through thousands of retail outlets worldwide and owns a 50% stake in Chevron Phillips Chemical. Since its 2012 spin-off from ConocoPhillips, Phillips 66 has focused on combining scale with disciplined, strategic expansion.

Phillips 66’s expected EPS growth rate for three to five years is currently 14.1%, which compares favorably with the industry's growth rate of 11.5%. The company beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed in the other, the average being 18.3%. Shares of this Zacks Rank #3 company have gained 8.4% in a year.

Price and Consensus: PSX

Galp Energia: Galp Energia is a Portuguese integrated energy company involved in exploration, production, refining, marketing, renewables, and various commercial activities. It operates two refineries in Portugal and has a strong footprint in supplying and trading oil and biofuels. The company produces more than 100,000 barrels of oil equivalent per day and employs nearly 7,000 people. While its core business remains in traditional energy, Galp is steadily increasing its investments in low-carbon initiatives, aiming to provide reliable and affordable energy while moving forward with its decarbonization goals.

GLPEY, based in Lisbon, has a four-quarter average earnings surprise of 33.6%. The firm has a market capitalization of $14.7 billion. Over the past 60 days, the Zacks Consensus Estimate for Galp Energia’s 2025 earnings has moved up 23.6%. This #3 Ranked company’s shares have increased 27.3% in a year.

Price and Consensus: GLPEY

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research