The TSX closed below 20,000 for the first time since July 20, 2021, to start the week of June 13, 2022. Its counterparts in the U.S. had nasty drops, especially the S&P 500, which entered bear territory. The correction in Canada’s lead stock market was intense, as all 11 primary sectors finished lower for the day.
Energy remains the top-performing sector year to date (+64.3%), although it declined 3% on Monday. However, one oil stock displayed resiliency and survived the carnage. Imperial Oil (TSX: IMO)(NYSE:IMO) advanced 1.17% to finish higher at $70 per share. The oil stock is also up 55.12% year to date.
Good and bad
While oil prices didn’t lose steam, investors’ fear about a 0.75% aggressive rate hike by the U.S. Federal Reserve brought North America’s stock markets down. For the TSX, it was the second-worst day in 2022. Ryan Crowther, portfolio manager at Franklin Templeton Canada, said investors worry about valuations and the challenging business environment going forward.
Crowther added, “A strong oil price isn’t enough to offset that sort of across-the-board risk-off sentiment that’s taking place today.” But on the bright side, he said that bear markets can bring great buying opportunities for investors with long time horizon. The key is to invest in businesses with solid fundamentals and cash flows.
Market-wide declines
Healthcare (-5.12%), materials (-4.75%), technology (-3.55%), and real estate (-3.41%) suffered worse declines than the energy sector. Shopify (-9.37%) and Lightspeed Commerce (-14.39%) led the decline of technology constituents. Even crypto stocks like Hut 8 (-10.46%) and HIVE Blockchain Technologies were not spared.
On the energy side, high flyers such as Crescent Point Energy, Cenovus Energy, MEG Energy, NuVista Energy declined by at least 3.3%. Besides Imperial Oil, top price performer Athabasca Oil did not pull back and instead gained 0.94%.
Energy bigwig
Imperial Oil is one of the bigwigs in Canada’s oil & gas industry. Moreover, American oil giant ExxonMobil is the majority shareholder (69.6%) of the $46.84 billion integrated oil company. Apart from producing and selling crude oil and natural gas, Imperial is also the country’s largest petroleum refiner.
Three main segments, namely Upstream, Downstream, and Chemical, are the revenue and income sources of Imperial Oil. In Q1 2022, the $1.17 billion net income was Imperial’s highest first-quarter net income in over 30 years. The upstream segment contributed the most with net income reaching $782 million, an 890% year-over-year increase.
Notably, the net income growth versus Q1 2021 is 199%. Brad Corson, Imperial Oil’s chairman, president, and CEO, said, “Imperial achieved strong financial results across all business lines in the first quarter as pandemic restrictions were lifted and commodity prices further strengthened.”
Corson added, “With strong margins across all our businesses, we are very well positioned to continue generating substantial free cash flow this year.” The competitive advantage of Imperial Oil is that it operates across all stages in the oil & gas industry.
Solid pick
Imperial Oil pays a modest 1.94% dividend, but it remains a solid pick for income investors. This oil major company has been paying dividends for more than 100 years and has raised its annual dividend for 27 consecutive years. Besides the growing payouts, the share price could still double in five years.
