Energy companies play an indispensable role in society, fueling our homes, businesses and vehicles. But they also present intriguing investment vehicles, especially in the realm of energy stocks to invest in.
As a literal powerhouse behind the global economy, the energy sector maintains its significance through utilities, transportation, and other essential services and often provides investors a sanctuary of relatively secure and stable investments.
Currently, a surge in the prices of key commodities such as oil and natural gas (which have seen a 7% and a 50% rise in futures respectively over the past six months) has intensified the spotlight on energy stocks.
Devon Energy (DVN)
Devon Energy (NYSE:DVN) is a top energy giant that finds its stock trading in oversold territory. It recently unveiled a promising second quarter oil production report, setting sights on a 330,000 barrels-per-day target for the following quarter. Coupled with aggressive buybacks and debt reductions, the energy giant seems committed to enhancing shareholder value.
The company’s debt is also down to 0.6 times its equity, which is 61% lower than its 2020 levels.
Moreover, a rock-solid 13.4% earnings yield places DVN at the crossroads of growth and income potential. However, slight earnings miss and trimmed dividends cast a brief shadow, causing the stock to lag momentarily.
On the flip side, DVN looks to rebound after maintaining full-year production forecasts between 643,000 to 663,000 BOE per day, coupled with relatively strong 2023 crude prices. Moreover, management’s hint at reduced third quarter capital expenditures offers a silver lining for potential heightened returns.
With the stock trading at more than 37% lower than its 52-week high price of $78.80, the outlook remains radiant for this energy stalwart.
First Solar Inc (FSLR)
Solar energy stocks, particularly First Solar Inc (NASDAQ:FSLR), have faced a myriad of headwinds recently. Amidst the top solar stocks, First Solar stands out as the lone U.S.-based manufacturer. In today’s geopolitical landscape, this detachment from China could potentially spell an advantage should supply chain or political issues continue to intensify.
Even with the stock plunging over 20% since mid-August, the company’s second quarter results tell a different tale. Stellar net sales of $811 million and an impressive net income of $171 million demonstrate robust year-over-year growth rates.
Additionally, the firm’s forward EBITDA prediction hovers at a commendable 40%. By the conclusion of the year, projections suggest a handsome $7.8 EPS, gearing up for a leap to $13 the subsequent year. Tipranks also paints an optimistic picture, slotting the stock with a “Moderate Buy” rating, suggesting a compelling 65% upward trajectory from current valuations.
Brookfield Renewable Partners (BEP)
Brookfield Renewable Partners (NYSE:BEP) is truly a titan on the renewable energy front with a diverse portfolio spanning hydroelectric, wind and solar assets across five continents. Year to date, the stock is down 17%, showcasing resilience even after a June stumble. Meanwhile, it remains as solid as ever on the financial front, attracting a 10 on 10 and 7 on 10 growth and profitability rank, respectively, from GuruFocus.
Moreover, with the economic constraints of today, smaller renewable outfits face intense financial headwinds. This climate presents BEP, with its vast acquisition arm and a hefty $1 billion in cash reserves, a golden opportunity to cherry-pick stellar deals in the green energy space.
BEP’s bold strategy aims for a rare 12%-15% return, standing out in today’s market versus conventional energy stocks. Also, an impending alliance with American Equity Investment Life Holding Company is in the works, signifying BEP’s unyielding pledge to sustainability.
Halliburton (NYSE:HAL), a global frontrunner in oilfield services, stands out for its comprehensive suite of offerings and for bolstering the efficiency of oil companies. Its specialized capabilities encompass well construction, cementing, and completion services, including other demands of the upstream oil and gas sector.
The current positioning of Halliburton stock paints an optimistic picture. A marked increase in revenue was observed in the second quarter, registering 14.2% growth. Even more striking was the surge in EEPS, catapulting over 50% from the previous year to 77 cents. A closer examination of its earnings report reveals that over 50% of the company’s revenue stems from international endeavors, cementing its global positioning.
With this promising trajectory, it’s unsurprising that based on Tipranks consensus estimates, Halliburton receives a “Strong Buy” rating, suggesting an approximate 15% upside from its existing price point.
Enterprise Products Partners (EPD)
In the midst of global energy fluctuations, Houston-based midstream company Enterprise Products Partners (NYSE:EPD) finds itself in a favorable position, especially in light of geopolitical events like Russia’s move on Ukraine. This emphasizes the undeniable value of North American oil and gas, and EPD manages more than 11.9 million barrels of liquids daily and processing staggering amounts of natural gas.
Consistency is what sets EPD apart from its competition. Boasting 26 years of consecutive distribution growth, it’s solidified a reputation for reliability. Moreover, its latest increase pushes the dividend yield to an impressive 7%. Backed by a robust balance sheet flaunting $4 billion liquidity, EPD is well-equipped to navigate the capricious energy landscape. On the operational front, the firm is doing remarkably well with its second quarter, showing a whopping $1.3 billion in earnings, translating to 57 cents per share.
Enbridge (NYSE:ENB), a heavyweight in the energy infrastructure realm, boasts an extensive pipeline network traversing the U.S. and Canadian regions. Beyond this, the firm’s foothold extends to natural gas and electric utilities, driving consistent cash flows.
However, the stock has dipped by double-digit margins this year on the back of the market’s choppiness. Additionally, the market’s jitters can be traced back to Enbridge’s $14 billion acquisition of three U.S. natural gas utilities, with a substantial $4.6 billion materializing as assumed debt.
Positively, there’s growing speculation that Enbridge might soon overturn its misfortunes. Its enviable profitability numbers, marked by a healthy net income margin of 8.7% and almost $9.9 billion in cash from operations, certainly advocate for this. The company’s generous forward dividend yield of 8% further sweetens the deal.
Occidental Petroleum (OXY)
In curating a list of blue-chip stocks to invest in, Occidental Petroleum (NYSE:OXY) usually makes the list. A lot of it is because of investing mogul Warren Buffett’s unwavering endorsement of the stock, with his investment firm owning 25% of the company. While a minor earnings miss of 68 cents per share raised eyebrows, Occidental’s recent announcements paint a brighter picture. The company boasts an uptick in production guidance by 42,000 BOE daily while hinting at favorable revision of its full-year production expectations.
Occidental isn’t only about pumping oil. The company announced a significant $425 million common share buyback, supporting shareholder dividends north of $4 per share. Additionally, the company boasts a free cash flow yield of more than 14.4%, and with Buffett’s seal of approval, OXY stands poised for a promising 2024.
Most recently, Amazon (NASDAQ:AMZN) has joined hands with an OXY subsidiary specializing in carbon capture, poised to inject an extra $150 million into Occidental’s coffers. Hence, the fusion of legacy oil operations and sustainable forays offers a compelling narrative for prospective investors.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.