Markets
PXD

3 Energy Stocks That Scream Big Growth Potential

The energy sector has Wall Street buzzing. With prices hitting the gas pedal, the Energy Select Sector SPDR ETF (XLE) has seen a close to 22% jump year-over-year. Does oil demand –even in the face of trade war apprehensions – have room to run?

Back in March, the Credit Suisse team says between a one-two punch of robust fundamentals and dipping stock prices, suddenly, the energy sector’s valuations look “more attractive than they have been in several years.”

That said, Ari Wald – Oppenheimer’s head of technical analysis – finds the charts for the overall sector “mixed.” For this reason, Wald indicated on CNBC’s “Trading Nation:” “I think really selection is key” here.

Here, we turned to TipRanks’ Stock Screener tool to pinpoint the best energy stock picks to capitalize on the U.S. oil boom. We filtered by the Basic Materials sector to pick names that 1) suggest compelling return potential 2) have earned a ‘Buy’ analyst consensus rating.

In other words, these stocks all pose growth potential and have hooked positive Street-wide sentiment. Let’s dive into 3 energy gains-maker contenders.

EOG Resources

U.S. shale exploration and production company EOG Resources (EOG) is a former subsidiary of the infamous energy trader Enron. The energy player has been dubbed “the Apple of oil,” and is surely one to watch.

“On the flip side as far as opportunity, we think you want to buy leadership and we’re seeing the leadership in a lot of the E&P names like EOG Resources,” says Wald. “Here’s a stock that’s actually breaking above its 2014 high, coming off a new high, that former breakout level is now support,” the analyst adds, recommending this stock is worth the buy.

After all, EOG has amassed data spanning 5,000 horizontal wells. Calling real-time data “king” and one of its “most valuable resources,” the company uses technology to facilitate precise drilling. This cuts 3 things: 1) time 2) waste and 3) expenses.

It was a good opening half to 2018 for EOG investors: the stock surged 12% in growth. Compared to this time last summer, EOG stock has rocketed close to 37%.

EOG turned over a killer first quarter print to start the year. The company realized $638.6 million in net income against the same quarter for 2017 of merely $28.5 million. Anticipation for another strong earnings show will be circling come August 2, when EOG Resources posts its results for the second quarter.

Edward Jones analyst Brian Youngberg (Profile & Recommendations) highlights the company has “attractive portions across multiple basins,” adding: “Some of the other premier players, like Pioneer Natural (PXD), are more focused geographically. But EOG has a handful of positions they got into early, at a low cost.”

"They pulled back spending more than others did at a time when oil prices fell back," commends Youngberg, explaining: "They are willing to go defense when they have to, when oil falls, then switch back into offense pretty quickly."

Youngberg rates this oil driller a Buy and his bullish bets have paid off: the analyst scoops 10.5% in average profits on EOG.

Morningstar senior analyst Dave Meats likewise sounds off rooting for EOG’s market opportunity as a company that has the advantage of a “technical edge.” This way, EOG Resources “can lead the way in achieving technical benefits before some of its peers.”

Worthy of note, EOG produced 609,000 barrels of oil equivalent per day in 2017 on average; or a whopping 222 million total barrels. In proved reserves, EOG has a projected 2.527 billion barrels of oil equivalent.

Over the last three months, the ‘Moderate Buy’ energy stock has received two bullish recommendations, and two hold ratings from best-performing analysts. Importantly, Wall Street consensus expectations signal confidence: the 12-month average price target suggests 22% upside potential is still on pump for EOG. See EOG Price Target and Analyst Ratings Detail.

Chevron Group

Major oil company Chevron Group (CVX) inked a seven-year alliance with software giant Microsoft back in October rumored to be worth maybe billions- and definitely at least hundreds of millions of dollars.

The energy player produces a wealth of data has eyes on the partnership to power a digital evolution of oil fields. With Microsoft on board, Chevron can rev up computing power and as chief information officer of Chevron puts it, “ensure we can harness the value of our data.” Braun wanted the seven-year agreement to speak to just “how serious” they are about this “significant move” for Chevron.

While 2018 has not been a bright spot for the company (the stock has slipped 5% in the market), growth against this time last summer tells a different story: a close to 15% rise. The company’s new chief executive Michael Wirth has a straightforward goal: “to win in any environment.”

On Trading Nation,” Michael Bapis – HighTower Advisors’ partner and managing director at the Bapis Group – made a call for near-term challenges to settle, clearing headway for energy’s bull run to keep charging.

Investors fear sinking crude oil prices and tariff wars- a slew of global puzzle pieces in the fray. Yet, Bapis assures, “I think that’s going to subside.” Short-term, one player Bapis names to “pull the whole energy sector out of this dip here that we’re looking at:” Chevron.

Mizuho’s energy analyst Paul Sankey (Profile & Recommendations) upgraded the stock two months ago to a Buy and lifted expectations, believing Chevron could hit $145 in stock price. This energy player is square in “a multi-year sweet spot.”

Sankey’s bet: Chevron could unleash 6% in yearly oil production growth through the next two years. Specifically, the analyst underscores CVX’s four oil and natural gas “mega-asset” areas located in: 1) the Permian Basin 2) the Gulf of Mexico 3) Kazakhstan 4) Northwest Australia.

Consider that 6 best-performing analysts on Wall Street are taking the odds on this ‘Strong Buy’ stock. The consensus average price target lands at $146.67, marking 24% in upside potential for Chevron. See CVX Price Target and Analyst Ratings Detail.

Pioneer Natural

Independent oil and gas exploration as well as production company Pioneer Natural Resources (PXD) has operations in the U.S. The energy giant’s two key areas of focus: the Permian Basin and Eagle Ford Shale regions of Texas.

Charles Robertson II, (Profile & Recommendations) senior research analyst for Cowen covering oil and gas exploration and production rates PXD a Buy with a $250 price target. In other words, Robertson thinks the stock could rally up to 42%. As Pioneer Natural Resources has vaulted nearly 36% since last summer, the company has benefited from landing buyers outside China.

China’s sluggish demand is not good for neither crude prices nor energy stocks bigger picture, says Robertson. Here’s why PXD can escape this impact: “While companies like OXY and PXD have shipped to China, they historically have also found buyers elsewhere in the world like Canada, Europe, Latin America, and the Mediterranean.”

Ultimately, Robertson contends that this energy pick quite simply “stands out.” Robertson is impressed with PXD’s “notable leverage to both pricing points since it sells its volumes in the Gulf Coast as well as to international buyers for a premium. Since more Version 3.0+s are expected to be added to the 2018 program for higher production guidance, we see the potential for PXD’s cash flow to become slightly more sensitive to crude pricing.”

Street-wide, the ‘Moderate Buy’ energy stock has won 12 buy ratings in 3 months- including two new bullish analysts. Last month, Mizuho initiated a Buy on PXD stock and KLR Group upgraded the stock from a Hold to a Buy. Wall Street clearly likes the market prospects ahead for Pioneer Natural Resources: consensus expectations translate to a robust 40% in upside potential. See PXD Price Target and Analyst Ratings Detail.

Our database spans over 5,000 stocks. Discover your own stock names that showcase monster upside potential, in any sector you choose. Go to the Nasdaq Smart Portfolio stock screener now.

This article was written by Julie Lamb.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

TipRanks

TipRanks is the most comprehensive data set of sell side analysts and hedge fund managers. TipRanks' multi-award winning platform ranks financial experts based on measured performance and the accuracy of their predictions so investors know who to trust when making investment decisions.

Learn More