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BP Among Leaders of Fair Value Increases by Morningstar

In the energy sector, 25% of the companies covered by Morningstar garnered fair-value increases of more than 10%.
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Commodity prices have gone gangbusters this year, with the S&P Goldman Sachs Commodity Index soaring 39%.

So it’s no great surprise that during the first-quarter earnings season, Morningstar analysts made their biggest increases for stocks’ fair-value estimates in the basic materials and energy sectors.

In the basic materials sector, 26% of the 27 stocks covered by Morningstar analysts received fair-value increases of more than 10%. And in the energy sector, 25% of the 53 companies covered by Morningstar analysts garnered fair-value increases of more than 10%.

Among the basic materials stocks that received the highest fair-value increases are:

· Livent  (LTHM) - Get Livent Corporation Report, a lithium producer (40% increase in fair value estimate);

· Anglo American  (NGLOY) , a mining company (24% fair value increase);

· Albemarle  (ALB) - Get Albemarle Corporation Report, a chemicals company (20% fair value increase); and

· CF Industries  (CF) - Get CF Industries Holdings Inc. Report, a fertilizer producer (15% fair value increase).

Among the energy stocks that received the highest fair-value increases are:

· Equinor  (EQNR) - Get Equinor ASA Report, a Norwegian oil producer (54% increase in fair value estimate);

· Liberty Energy  (LBRT) - Get Liberty Energy Inc. Class A Report, which provides fracking services (25% fair value increase);

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· Valero Energy  (VLO) - Get Valero Energy Corporation Report, an oil refiner (25% fair value increase); and

· BP  (BP) - Get BP p.l.c. Report, an oil producer (21% fair value increase).

Basic Materials Analysis

Demand for lithium is growing in the high double digits amid the surge in electric vehicle output. That benefits Livent and Albemarle, the world’s largest lithium producer, Morningstar said.

It raised its fair-value estimate for Livent to $35 per share from $25 and for Albemarle to $270 from $225. Livent recently traded at $30.20 and Albemarle at $255.07.

“Higher price forecasts for palladium, copper, and iron ore lifted fair value estimates for mining companies,” Morningstar said in a report. Anglo American’s fair value climbed to $21.40 from $17.30. It recently traded at $23.95.

Morningstar lifted its long-term forecast for nitrogen fertilizer prices to $320 per metric ton from $280 previously. And that led it to boost CF Industries’ fair value to $75 from $65. The stock recently traded at $96.13.

Energy Analysis

Equinor and BP are benefiting from surging oil prices. U.S. oil prices have climbed 52% year to date. Morningstar raised Equinor’s fair value to $40 from $26, and BP’s to $37.50 from $31. Equinor recently traded at $37.38 and BP at $32.67.

Morningstar raised its fair value estimate for Valero Energy to $101 from $93, based on an improved outlook for its refining margins. Valero recently traded at $128.12.

After Liberty posted its first quarterly operating profit in two years, Morningstar boosted its fair value to $15 from $12. The stock recently traded at $16.32.