Energy demand has seen a significant rebound from the pandemic-driven lows as countries around the world have returned to full capacity. With the astonishing amount of stimulus that governments poured into the economy combined with the supply imbalances and constraints that have plagued the globe, commodity prices are surging to multiyear highs. Oil prices have been no exception, with WTI crude prices rising over 570% since April of 2020 to back above $80/barrel.
It’s no secret that oil-related stocks tend to have a high correlation with the price of crude oil. Higher oil prices are good news for oil company margins and profits. These instances of commodity price gains provide investors with opportunities. And with crude prices continuing to move higher, investors would be wise to consider an allocation to these stocks if they haven’t already done so.
After years of underperformance and underinvestment, last year was the first year in some time in which we saw the energy sector lead all sector returns. Much has been said and written in recent weeks about the Fed tightening and how it will bring down inflation, with energy prices coming down along with it. One thing we know for sure is that price trends tend to continue for longer than most people expect, and it wouldn’t be too shocking to see oil prices continue their rise in the short-term.
Quantitative research studies suggest that approximately half of a stock’s future price appreciation is due to its industry grouping. The Zacks Oil and Gas – Field Services industry group is currently ranked in the top 32% of all 254 industry groups. Because it is ranked in the top half of all industries, we expect it to outperform over the next three to six months.
The Zacks Oil and Gas – Field Services industry group has started out the year strong with a greater than 5% return, while the S&P is currently down more than 2% to kick off January. The three oil services companies we will discuss below are all significantly outperforming both the S&P as well as their collective industry group. By focusing on stocks within the top Zacks Ranked Industries, investors can dramatically improve their trading success.
Halliburton Co. (HAL - Free Report)
Halliburton provides a range of products to oil and natural gas companies globally. The company is one of the largest oilfield service providers in the world and offers a variety of equipment, management, engineering and construction services in over 80 countries. Founded in 1919 and based out of Houston, TX, HAL serves the upstream oil and gas industry throughout the reservoir lifecycle.
A Zacks #2 (Buy) stock, Halliburton’s ability to produce strong free cash flow indicates its financial strength. HAL generated a FCF tally of more than $1.1 billion in 2020, with approximately $900 million through the first three quarters of 2021. The company’s plentiful cash flows enable it to pursue a growth-oriented initiative.
HAL has surpassed earnings estimates in each of the past thirteen quarters. Over the past four quarters, the company has delivered an average earnings surprise of +12.49%. HAL stock trades at a reasonable 16.8 forward P/E and is showing relative strength to start out the new year with a greater than 25% gain.
Just Released: Zacks Top 10 Stocks for 2024
Hurry – you can still get in early on our 10 top tickers for 2024. Hand-picked by Zacks Director of Research, Sheraz Mian, this portfolio has been stunningly and consistently successful. From inception in 2012 through November, 2023, the Zacks Top 10 Stocks gained +974.1%, nearly TRIPLING the S&P 500’s +340.1%. Sheraz has combed through 4,400 companies covered by the Zacks Rank and handpicked the best 10 to buy and hold in 2024. You can still be among the first to see these just-released stocks with enormous potential.
See New Top 10 Stocks >>
Energy demand has seen a significant rebound from the pandemic-driven lows as countries around the world have returned to full capacity. With the astonishing amount of stimulus that governments poured into the economy combined with the supply imbalances and constraints that have plagued the globe, commodity prices are surging to multiyear highs. Oil prices have been no exception, with WTI crude prices rising over 570% since April of 2020 to back above $80/barrel.
It’s no secret that oil-related stocks tend to have a high correlation with the price of crude oil. Higher oil prices are good news for oil company margins and profits. These instances of commodity price gains provide investors with opportunities. And with crude prices continuing to move higher, investors would be wise to consider an allocation to these stocks if they haven’t already done so.
After years of underperformance and underinvestment, last year was the first year in some time in which we saw the energy sector lead all sector returns. Much has been said and written in recent weeks about the Fed tightening and how it will bring down inflation, with energy prices coming down along with it. One thing we know for sure is that price trends tend to continue for longer than most people expect, and it wouldn’t be too shocking to see oil prices continue their rise in the short-term.
Quantitative research studies suggest that approximately half of a stock’s future price appreciation is due to its industry grouping. The Zacks Oil and Gas – Field Services industry group is currently ranked in the top 32% of all 254 industry groups. Because it is ranked in the top half of all industries, we expect it to outperform over the next three to six months.
The Zacks Oil and Gas – Field Services industry group has started out the year strong with a greater than 5% return, while the S&P is currently down more than 2% to kick off January. The three oil services companies we will discuss below are all significantly outperforming both the S&P as well as their collective industry group. By focusing on stocks within the top Zacks Ranked Industries, investors can dramatically improve their trading success.
Halliburton Co. (HAL - Free Report)
Halliburton provides a range of products to oil and natural gas companies globally. The company is one of the largest oilfield service providers in the world and offers a variety of equipment, management, engineering and construction services in over 80 countries. Founded in 1919 and based out of Houston, TX, HAL serves the upstream oil and gas industry throughout the reservoir lifecycle.
A Zacks #2 (Buy) stock, Halliburton’s ability to produce strong free cash flow indicates its financial strength. HAL generated a FCF tally of more than $1.1 billion in 2020, with approximately $900 million through the first three quarters of 2021. The company’s plentiful cash flows enable it to pursue a growth-oriented initiative.
HAL has surpassed earnings estimates in each of the past thirteen quarters. Over the past four quarters, the company has delivered an average earnings surprise of +12.49%. HAL stock trades at a reasonable 16.8 forward P/E and is showing relative strength to start out the new year with a greater than 25% gain.
Just Released: Zacks Top 10 Stocks for 2024
Hurry – you can still get in early on our 10 top tickers for 2024. Hand-picked by Zacks Director of Research, Sheraz Mian, this portfolio has been stunningly and consistently successful. From inception in 2012 through November, 2023, the Zacks Top 10 Stocks gained +974.1%, nearly TRIPLING the S&P 500’s +340.1%. Sheraz has combed through 4,400 companies covered by the Zacks Rank and handpicked the best 10 to buy and hold in 2024. You can still be among the first to see these just-released stocks with enormous potential.
See New Top 10 Stocks >>
Get the latest research report on SLB - FREE
Get the latest research report on HAL - FREE