Refiners Outpace Markets as Margins Drive Marathon, PBF Energy, and Phillips 66 Momentum

The U.S. oil refining sector has been a standout in the energy industry over the past year, driven by strong refining margins and sustained demand for transportation fuels. According to Zacks Investment Research, major players such as Marathon Petroleum, PBF Energy, and Phillips 66 have been notable beneficiaries, showing significant increases in share prices and stronger financial positions amid these favorable conditions.

Margins and Demand Drive Industry Gains

Refining margins (the difference between crude oil costs and refined product prices) remain strong by historical standards, providing a boost to the profits of U.S. refiners. Zacks notes that healthy domestic and international demand for gasoline, diesel, and jet fuel, coupled with regional supply tightness, has caused industry earnings estimates for both 2026 and 2027 to climb sharply over the last year. Specifically, the Zacks Oil and Gas - Refining & Marketing industry’s aggregate earnings estimate for 2026 rose 253.5%, and the estimate for 2027 increased by 208.2% year-over-year.

Marathon Petroleum operates across three major U.S. regions (the Gulf Coast, Mid-Continent, and West Coast), offering operational flexibility and access to various crude feedstocks. The company’s midstream business, MPLX, supports an extensive distribution network that aids efficient movement of crude and products. Zacks states that Marathon Petroleum’s consensus 2026 earnings estimate indicates 499.3% growth, and its shares have gained 144.8% in a year. The company beat consensus earnings in three of the last four quarters, with an average surprise of 49.3%.

PBF Energy, another Zacks #1 Rank stock, maintains a national refining footprint and emphasizes flexible crude sourcing to adapt to shifting oil prices and supply. The company’s expected EPS annual growth rate for the next three to five years stands at 36.3%, surpassing the industry's growth rate of 33.7%. Over the last four quarters, PBF Energy also beat consensus earnings in three and missed once, with an average surprise of 123.4%. Its shares have surged 145.8% over the past year.

Phillips 66, also ranked #1 by Zacks, operates a diversified business that includes refining, marketing, logistics, chemicals, and renewable fuels, processing about 2 million barrels of crude oil per day. Its Marketing and Specialties segment operates approximately 7,620 branded U.S. outlets. Phillips 66 beat consensus earnings in all of the last four quarters, with an average surprise of 62.6%. The Zacks consensus estimate for its 2026 earnings per share suggests 387.4% year-over-year growth, and shares have increased 116.1% in a year. The company’s integrated operations support steady cash generation, with a current market capitalization of approximately $113 billion.

Industry Outperformance and Valuation

Over the past year, the Zacks Oil and Gas - Refining & Marketing industry has outperformed both the broader Zacks Oil - Energy sector and the S&P 500. The group rose 133% in that period, compared to a 39.9% increase for the broader energy sector and 11% for the S&P 500. This performance reflects strong profit margins, rising earnings outlooks, and improved balance sheets.

The industry’s financial health is further reflected in its trailing 12-month enterprise value-to-EBITDA (EV/EBITDA) ratio, currently at 6.38x, below the S&P 500’s 17.65x but slightly above the energy sector’s 6.29x. Historically, the industry's five-year EV/EBITDA range has spanned from 1.53x to 6.63x, with a median of 3.43x. This premium relative to its own history suggests investors are placing extra value on refiners’ strong cash flows in the current cycle.

Opportunities and Risks Ahead

Diversification into areas such as fuel retail, pipelines, storage, and transportation services has provided additional income streams for many refiners, reducing their dependence on refining profits alone. Expanding businesses in renewable diesel and sustainable aviation fuel also present new growth avenues as cleaner energy gains focus. However, industry profitability remains subject to volatility from crude pricing, inventories, regional spreads, and the risk of unplanned outages.

Despite the strong performance, several uncertainties could impact future earnings and valuations. These include fluctuations in oil prices, economic slowdowns, shifts in regulations regarding emissions and fuel standards, and rapid changes in energy technology that accelerate adoption of alternatives. Zacks emphasizes that while industry fundamentals remain encouraging, the refining sector has historically experienced dynamic and mean-reverting cycles that could reshape near-term outlooks.