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5 Soaring Energy Stocks With Potential for Further Gains
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The year 2020, by any standards, was one of unprecedented struggles for the energy sector. While most businesses were hard hit by the COVID-induced lockdowns, the demand destruction and price plunge associated with energy was like no other. However, the commodity has recovered strongly from those depths to more than $50 a barrel.
Revival of the Energy Market
The space finally has something to cheer about. Oil has been rallying for the past few months on continued vaccine-related developments that offer hope for an earlier-than-expected pickup in the commodity’s demand. Crude has been driven up further by Saudi Arabia’s surprise pledge to reduce oil output by 1 million barrels per day in February and March.
Most indicators show that energy could be on a slow but steady recovery path. Currently at around $54 per barrel, WTI oil prices are at multi-month highs, while the international benchmark (or the Brent) has finally broken above the psychological $55 threshold and to its highest level since February. It appears that the commodity is on the mend with the Energy Select Sector SPDR — an assortment of the largest U.S. energy companies — up nearly 46% over the past three months to be at the top of the S&P sector standings.
The renewed enthusiasm can be gauged from the fact that the Zacks Oil/Energy sector has gained 41.9% in the past three months, handily outperforming the S&P 500 Index’s 10% appreciation.
Why the Rally Is Likely to Continue
Apart from vaccine breakthroughs, much of the positive argument is simply a bet on stronger economic growth in America and the subsequent improvement in consumer spending. Following the epic 31.4% contraction in the April-June period, the U.S. GDP rebounded by a record 33.4% in the third quarter. Per the estimates from the Federal Reserve Bank of Atlanta, the U.S. economy is likely to grow at an impressive rate of 8.6% in the fourth quarter. The recently approved $900 billion stimulus package, plus President-elect Joe Biden’s $1.9 trillion coronavirus relief proposal should further bolster the economy. Amid this positive economic backdrop, end-user fuel usage is expected to improve.
Our Top Picks
After generous vaccine-induced gains for most energy companies, investors might wonder which stocks’ rally can continue in the days ahead.
To this, we suggest adding names that have room to increase further from a fundamental perspective. Given this backdrop, it will be fruitful to invest in stocks that have a favorable Zacks Rank.
We have narrowed down our search to five stocks that have popped more than 50% in the past three months. Each of our picks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy) and is likely maintain the positive momentum given their superior fundamentals.
The chart below shows the price performance of our five picks in the past three months.
Diamondback Energy (FANG - Free Report) : Diamondback Energy focuses on growth through a combination of acquisitions and active drilling in the Permian Basin. Diamondback's leading position in the unconventional play got another leg up with the proposed takeover of QEP Resources . A low-cost structure and investment grade balance sheet are the other positives in the Diamondback story.
The 2021 Zacks Consensus Estimate for this Midland, TX-based company indicates 54.5% earnings per share growth over 2020. Diamondback carries a Zacks Rank #1.
NOW Inc. (DNOW - Free Report) : A service provider to the upstream, midstream and downstream energy industries, NOW is a market leader in supply chain management network. The company’s efficient cost management and a debt-free balance sheet set it apart from its peers.
The 2021 Zacks Consensus Estimate for NOW indicates 50.3% earnings per share growth over 2020. It carries a Zacks Rank of 2.
Imperial Oil Limited (IMO - Free Report) : Imperial Oil’s integrated business portfolio of upstream and downstream assets provides it with a high level of stability, reducing the risk profile of the company. Strong execution and ramped-up activities in the Kearl, Cold Lake and Syncrude projects positions the company for solid production growth and is expected to augment its revenues and earnings going forward.
The 2021 Zacks Consensus Estimate for Imperial Oil indicates 228.2% earnings per share growth over 2020. The company currently carries a Zacks Rank #2.
Vermilion Energy (VET - Free Report) : Vermilion Energy is an oil and gas explorer with producing properties in Europe, North America and Australia. The company’s diversification across different continents provides it with certain advantages relative to the other upstream players. The energy explorer is currently focused on cost reductions and positive free cash flow generation.
The 2021 Zacks Consensus Estimate for Vermilion Energy indicates 94.3% earnings per share growth over 2020. The company currently carries a Zacks Rank #2.
Enerplus Corporation (ERF - Free Report) : Enerplus focuses on Bakken and Three Forks formations in the Williston Basin in North Dakota, together with interests in the Marcellus Basin in and waterflood projects in Canada. Banking on its low financial leverage and robust liquidity, this upstream energy firm is in a relatively better position to tackle the coronavirus-led industry woes.
The 2021 Zacks Consensus Estimate for Enerplus indicates 437.5% earnings per share growth over 2020. The company carries a Zacks Rank of 2.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
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5 Soaring Energy Stocks With Potential for Further Gains
The year 2020, by any standards, was one of unprecedented struggles for the energy sector. While most businesses were hard hit by the COVID-induced lockdowns, the demand destruction and price plunge associated with energy was like no other. However, the commodity has recovered strongly from those depths to more than $50 a barrel.
Revival of the Energy Market
The space finally has something to cheer about. Oil has been rallying for the past few months on continued vaccine-related developments that offer hope for an earlier-than-expected pickup in the commodity’s demand. Crude has been driven up further by Saudi Arabia’s surprise pledge to reduce oil output by 1 million barrels per day in February and March.
Most indicators show that energy could be on a slow but steady recovery path. Currently at around $54 per barrel, WTI oil prices are at multi-month highs, while the international benchmark (or the Brent) has finally broken above the psychological $55 threshold and to its highest level since February. It appears that the commodity is on the mend with the Energy Select Sector SPDR — an assortment of the largest U.S. energy companies — up nearly 46% over the past three months to be at the top of the S&P sector standings.
The renewed enthusiasm can be gauged from the fact that the Zacks Oil/Energy sector has gained 41.9% in the past three months, handily outperforming the S&P 500 Index’s 10% appreciation.
Why the Rally Is Likely to Continue
Apart from vaccine breakthroughs, much of the positive argument is simply a bet on stronger economic growth in America and the subsequent improvement in consumer spending. Following the epic 31.4% contraction in the April-June period, the U.S. GDP rebounded by a record 33.4% in the third quarter. Per the estimates from the Federal Reserve Bank of Atlanta, the U.S. economy is likely to grow at an impressive rate of 8.6% in the fourth quarter. The recently approved $900 billion stimulus package, plus President-elect Joe Biden’s $1.9 trillion coronavirus relief proposal should further bolster the economy. Amid this positive economic backdrop, end-user fuel usage is expected to improve.
Our Top Picks
After generous vaccine-induced gains for most energy companies, investors might wonder which stocks’ rally can continue in the days ahead.
To this, we suggest adding names that have room to increase further from a fundamental perspective. Given this backdrop, it will be fruitful to invest in stocks that have a favorable Zacks Rank.
We have narrowed down our search to five stocks that have popped more than 50% in the past three months. Each of our picks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy) and is likely maintain the positive momentum given their superior fundamentals.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past three months.
Diamondback Energy (FANG - Free Report) : Diamondback Energy focuses on growth through a combination of acquisitions and active drilling in the Permian Basin. Diamondback's leading position in the unconventional play got another leg up with the proposed takeover of QEP Resources . A low-cost structure and investment grade balance sheet are the other positives in the Diamondback story.
The 2021 Zacks Consensus Estimate for this Midland, TX-based company indicates 54.5% earnings per share growth over 2020. Diamondback carries a Zacks Rank #1.
NOW Inc. (DNOW - Free Report) : A service provider to the upstream, midstream and downstream energy industries, NOW is a market leader in supply chain management network. The company’s efficient cost management and a debt-free balance sheet set it apart from its peers.
The 2021 Zacks Consensus Estimate for NOW indicates 50.3% earnings per share growth over 2020. It carries a Zacks Rank of 2.
Imperial Oil Limited (IMO - Free Report) : Imperial Oil’s integrated business portfolio of upstream and downstream assets provides it with a high level of stability, reducing the risk profile of the company. Strong execution and ramped-up activities in the Kearl, Cold Lake and Syncrude projects positions the company for solid production growth and is expected to augment its revenues and earnings going forward.
The 2021 Zacks Consensus Estimate for Imperial Oil indicates 228.2% earnings per share growth over 2020. The company currently carries a Zacks Rank #2.
Vermilion Energy (VET - Free Report) : Vermilion Energy is an oil and gas explorer with producing properties in Europe, North America and Australia. The company’s diversification across different continents provides it with certain advantages relative to the other upstream players. The energy explorer is currently focused on cost reductions and positive free cash flow generation.
The 2021 Zacks Consensus Estimate for Vermilion Energy indicates 94.3% earnings per share growth over 2020. The company currently carries a Zacks Rank #2.
Enerplus Corporation (ERF - Free Report) : Enerplus focuses on Bakken and Three Forks formations in the Williston Basin in North Dakota, together with interests in the Marcellus Basin in and waterflood projects in Canada. Banking on its low financial leverage and robust liquidity, this upstream energy firm is in a relatively better position to tackle the coronavirus-led industry woes.
The 2021 Zacks Consensus Estimate for Enerplus indicates 437.5% earnings per share growth over 2020. The company carries a Zacks Rank of 2.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>