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4 Energy Stocks to Consider in 2017 Over Kinder Morgan (KMI)
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Over the last three months, shares of Kinder Morgan Inc. (KMI - Free Report) slipped more than 10%, substantially underperforming the Zacks categorized Oil & Gas-Production/Pipeline industry’s decline of only 2%. Hence, it may be the right time to offload the stock of this midstream player.
However, it is not advisable to avoid all energy stocks right now, as the possibilities of improving commodity prices should lead to better return from these scrips in 2017.
Why Dump the Kinder Morgan Stock?
Kinder Morgan carries a Zacks Rank #4 (Sell), which implies that the stock will underperform the broader U.S. equity market over the next one to three months. Moreover, the Value and Growth scores for Kinder Morgan stand at D & F. The combination of the low scores and an unfavorable Zacks Rank raises caution.
The company is overvalued as revealed that Kinder Morgan has forward PE ratio of 33.08 as compared to industry average of 14.30. We also expect the company to witness year-over-year earnings decline of more than 10% for the current year.
Moreover, the need for additional transportation and storage of natural gas and oil arises when there is a surge in the production of the commodities. Given the weak oil and gas prices, the production level of both the commodities are significantly lower than 2015. Naturally, there is less demand for new midstream assets to carry and store the commodities.
The company seems to be prepared for the decline in the need of energy midstream assets. Consequently, it has lowered its 2016 capital spending guidance. It goes without saying that lower spending for midstream operations might hamper the company’s future cash flows.
Energy Stocks Worth Considering
The prospects for all energy stocks are not the same as Kinder Morgan. Some upstream energy players are set for a turnaround after a massive improvement in both oil and natural gas prices compared with early 2016. Although both oil and natural gas prices are way below the level they were trading during mid-2014, the commodities have significantly recovered from the historical lows they reached during the first quarter of this year.
From a 17-year low mark of around $1.6 per million British thermal units (MMBtu) during the first quarter, natural gas prices have recovered substantially and are currently trading above the key psychological level of $3 per MMBtu. Cold weather forecast has also pushed the commodity price up as many homes in the U.S. need natural gas for heating purposes.
Moreover, the recent deal between OPEC and non-OPEC producers to curb production amid oversupplied commodity market has led crude to gain momentum. Oil has already crossed the psychological level of $50 per barrel.
We expect that the exploration and production companies will be able to sell the commodity at higher prices, in turn, garnering increased cash flows for shareholders. Moreover, firms involved in engineering and construction operations and solely focused on the offshore or onshore oil and gas business will likely receive more contracts following the increase in upstream operations.
Our Picks
With the help of the Zacks Stock Screener, we have zeroed in on four stocks that flaunt a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) and offer Value and Growth scores of ‘B’ or better. With extensive research we found that the key to success is to focus on stocks with Zacks Rank #1 and #2 and Value or Growth scores of B or better.
Incorporated in 1959, Houston, TX-based McDermott International Inc. is a leading global engineering and construction firm that has a diversified product portfolio, specialty manufacturing and service capabilities, and proprietary technological expertise.
Despite the weak commodity pricing environment, this Zacks Rank #1 stock has maintained its excellent track record of earnings surprise history, handily beating estimates in each of the last eight quarters. Key stats to note:
Value score: ‘A’
Growth score: ‘B’
Headquartered in Denver, CO, Antero Resources Corporation (AR - Free Report) is involved in the exploitation and development of oil and natural gas properties in the U.S.
The company currently carries a Zacks Rank #2 and managed to beat the Zacks Consensus Estimate in each of the last four quarters with an average positive earnings surprise of 370.83%. We also expect the company to post year-over-year earnings improvement of 74.74% for the current year. Key stats to note:
Value score: ‘A’
Growth score: ‘A’
CONE Midstream Partners LP – based in Canonsburg, PA – is the operator and developer of natural gas gathering and other midstream energy properties in the Marcellus Shale.
The partnership, which is involved in midstream operations, managed to beat the Zacks Consensus Estimate in each of the last four quarters. This Zacks Rank #1 stock is also projected to witness year-over-year earnings improvement of 33.1% for the current year. You can see the complete list of today’s Zacks #1 Rank stocks here.Key stats to note:
Value score: ‘A’
Growth score: ‘B’
Royal Dutch Shell plc owns a strong and diversified portfolio of global energy businesses that offer attractive long-term growth opportunities. The company’s upstream business is expected to grow on the back of improved commodity prices. Presently, the company carries a Zacks Rank #2. Key stats to note:
Value score: ‘B’
Growth score: ‘B’
Forget the gym, finding great stocks should be your New Year's resolution! Don't miss out on our new Top 10 Stocks for 2017 list, which has been hand-picked from 4,400 stocks covered by the Zacks Rank. Be one of the first to see this year's list here>>
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4 Energy Stocks to Consider in 2017 Over Kinder Morgan (KMI)
Over the last three months, shares of Kinder Morgan Inc. (KMI - Free Report) slipped more than 10%, substantially underperforming the Zacks categorized Oil & Gas-Production/Pipeline industry’s decline of only 2%. Hence, it may be the right time to offload the stock of this midstream player.
However, it is not advisable to avoid all energy stocks right now, as the possibilities of improving commodity prices should lead to better return from these scrips in 2017.
Why Dump the Kinder Morgan Stock?
Kinder Morgan carries a Zacks Rank #4 (Sell), which implies that the stock will underperform the broader U.S. equity market over the next one to three months. Moreover, the Value and Growth scores for Kinder Morgan stand at D & F. The combination of the low scores and an unfavorable Zacks Rank raises caution.
The company is overvalued as revealed that Kinder Morgan has forward PE ratio of 33.08 as compared to industry average of 14.30. We also expect the company to witness year-over-year earnings decline of more than 10% for the current year.
Moreover, the need for additional transportation and storage of natural gas and oil arises when there is a surge in the production of the commodities. Given the weak oil and gas prices, the production level of both the commodities are significantly lower than 2015. Naturally, there is less demand for new midstream assets to carry and store the commodities.
The company seems to be prepared for the decline in the need of energy midstream assets. Consequently, it has lowered its 2016 capital spending guidance. It goes without saying that lower spending for midstream operations might hamper the company’s future cash flows.
Energy Stocks Worth Considering
The prospects for all energy stocks are not the same as Kinder Morgan. Some upstream energy players are set for a turnaround after a massive improvement in both oil and natural gas prices compared with early 2016. Although both oil and natural gas prices are way below the level they were trading during mid-2014, the commodities have significantly recovered from the historical lows they reached during the first quarter of this year.
From a 17-year low mark of around $1.6 per million British thermal units (MMBtu) during the first quarter, natural gas prices have recovered substantially and are currently trading above the key psychological level of $3 per MMBtu. Cold weather forecast has also pushed the commodity price up as many homes in the U.S. need natural gas for heating purposes.
Moreover, the recent deal between OPEC and non-OPEC producers to curb production amid oversupplied commodity market has led crude to gain momentum. Oil has already crossed the psychological level of $50 per barrel.
We expect that the exploration and production companies will be able to sell the commodity at higher prices, in turn, garnering increased cash flows for shareholders. Moreover, firms involved in engineering and construction operations and solely focused on the offshore or onshore oil and gas business will likely receive more contracts following the increase in upstream operations.
Our Picks
With the help of the Zacks Stock Screener, we have zeroed in on four stocks that flaunt a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) and offer Value and Growth scores of ‘B’ or better. With extensive research we found that the key to success is to focus on stocks with Zacks Rank #1 and #2 and Value or Growth scores of B or better.
Incorporated in 1959, Houston, TX-based McDermott International Inc. is a leading global engineering and construction firm that has a diversified product portfolio, specialty manufacturing and service capabilities, and proprietary technological expertise.
Despite the weak commodity pricing environment, this Zacks Rank #1 stock has maintained its excellent track record of earnings surprise history, handily beating estimates in each of the last eight quarters. Key stats to note:
Value score: ‘A’
Growth score: ‘B’
Headquartered in Denver, CO, Antero Resources Corporation (AR - Free Report) is involved in the exploitation and development of oil and natural gas properties in the U.S.
The company currently carries a Zacks Rank #2 and managed to beat the Zacks Consensus Estimate in each of the last four quarters with an average positive earnings surprise of 370.83%. We also expect the company to post year-over-year earnings improvement of 74.74% for the current year. Key stats to note:
Value score: ‘A’
Growth score: ‘A’
CONE Midstream Partners LP – based in Canonsburg, PA – is the operator and developer of natural gas gathering and other midstream energy properties in the Marcellus Shale.
The partnership, which is involved in midstream operations, managed to beat the Zacks Consensus Estimate in each of the last four quarters. This Zacks Rank #1 stock is also projected to witness year-over-year earnings improvement of 33.1% for the current year. You can see the complete list of today’s Zacks #1 Rank stocks here.Key stats to note:
Value score: ‘A’
Growth score: ‘B’
Royal Dutch Shell plc owns a strong and diversified portfolio of global energy businesses that offer attractive long-term growth opportunities. The company’s upstream business is expected to grow on the back of improved commodity prices. Presently, the company carries a Zacks Rank #2. Key stats to note:
Value score: ‘B’
Growth score: ‘B’
Forget the gym, finding great stocks should be your New Year's resolution! Don't miss out on our new Top 10 Stocks for 2017 list, which has been hand-picked from 4,400 stocks covered by the Zacks Rank. Be one of the first to see this year's list here>>