3 Energy Stocks Likely to Fuel Returns
Volatility is a fundamental characteristic of the energy sector.
The vulnerability of the underlying commodities - oil and natural
gas - to the broader economy is evident from price fluctuations
that are inevitable when key issues hit the market.
For the January-March period, crude oil swung between lows of
$91.25 per barrel to highs of $105.22, staying above the $100 per
barrel mark for quite some time. Even
picked up to over $6 per million Btu after remaining muted at
around the $4 mark.
Several issues had a role to play in these price swings. The year
started with a frigid winter that persisted longer than usual,
boosting the demand for energy for heating purposes. Also, an
improvement in the overall U.S. economy supported this demand rise.
Further, the Ukraine-Russia tension escalated
to new highs, which were again somewhat capped by the anticipated
slowdown of the Chinese economy.
While most of these may seem bad news upfront, some of the energy
companies had a gala time, making a quick buck. Perked up demand
for oil & natural gas, and higher per unit realization proved
With the first-quarter results underway, we remain optimistic about
some earnings surprises in the energy space.
Making the Right Pick
The huge number of industry participants makes it difficult to
shortlist stocks that have the potential to beat earnings. To make
things easy, we looked for the combination of a favorable Zacks
Rank - Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) - and a
Earnings ESP is our proprietary methodology for identifying stocks
that have high chances of posting a positive surprise in the
upcoming announcement. It shows the percentage difference between
the Most Accurate estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with this combination,
a positive earnings surprise happens nearly 70% of
. Applying this strategy, we have found the following three stocks
that are likely to stand out this earnings season.
) is a Zacks Rank #1 stock with an Earnings ESP of +2.70%. The
Zacks Consensus Estimate for the first quarter currently stands at
$1.11 per share, representing robust growth over the year-ago
quarter. The company beat estimates in three out of the past four
quarters and has an average positive surprise of 6.67%. Also, the
stock has gained nearly 29% since the start of the year.
Based in Tulsa, OK, Unit Corporation is an oil & gas drilling
and exploration company with operations primarily in the U.S. The
company works through three segments - Oil and Natural Gas,
Contract Drilling and Mid-Stream.
is set to report first-quarter 2014 results on May 8.
Headquartered in Fort Worth, TX,
Athlon Energy Inc.
) is another Zacks Rank #1 stock with an Earnings ESP of +3.70%.
The Zacks Consensus Estimate for the first quarter currently stands
at 27 cents per share. In the past two months, the majority of
brokerage firms pumped up the estimates, an indication of a beat in
the upcoming earnings. Also,
Athlon stock has increased nearly 35% since Jan
This independent exploration and production company is focused on
the acquisition and development of unconventional oil and natural
gas properties in the Permian Basin.
is slated to release first-quarter 2014 results on May 6.
Another stock to look out for this earnings season is
Canadian Natural Resources Limited
), carrying a Zacks Rank #2. The company has an Earnings ESP of
+8.22%. The Zacks Consensus Estimate for the first quarter is
currently pegged at 73 cents per share, substantially higher than
the year-ago quarter level. The Canadian Natural stock has gained
nearly 40% year to date.
Canadian Natural is engaged in the acquisition, development and
exploitation of crude oil and natural gas properties. It is one of
the largest independent exploration and production companies in
Canada, with extensive heavy crude oil and natural gas
is expected to report first-quarter 2014 results on May 8.
Despite its volatile nature, the energy sector is experiencing a
slow-but-steady growth on the back of ever-increasing energy
demand. According to the Energy Information Administration (EIA),
which provides official energy statistics from the U.S. Government,
global oil demand will grow another 1.2 million barrels per day in
2014. So betting on good energy stocks should not disappoint in the
long run. Moreover, an earnings beat should immediately translate
into price appreciation for these stocks.
ATHLON ENERGY (ATHL): Free Stock Analysis
CDN NTRL RSRCS (CNQ): Free Stock Analysis
UNIT CORP (UNT): Free Stock Analysis Report
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