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Exxon, Chevron & 3 Other Energy Stocks to Buy on the Dip
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U.S. crude prices steadied on Friday to snap a five-session losing streak but still ended the week 6.4% lower, as concerns over the reimposition of lockdowns in Europe and safety issues associated with the AstraZeneca (AZN - Free Report) COVID-19 vaccine dented the outlook for oil demand recovery.
Futures in New York on Friday settled at $61.42 a barrel, while Brent — the international benchmark — closed at $64.53 a barrel, posting a weekly loss of 6.8%. Both contracts recorded their worst week since October.
Crude Hits a Speed Bump
Oil prices are under pressure over the past couple of weeks as a number of European nations have imposed lockdowns aimed at slowing the spread of a third wave of the contagion, thereby threatening the rebound in fuel demand. Further, a scare over blood clots related to the use of AstraZeneca vaccine saw several countries slow down/temporarily suspend its rollout, which compounded the bearish sentiment in the energy market. At the same time, U.S. Federal Reserve’s acknowledgement of inflation risks this year have made oil traders wary as this might lower consumer discretionary income, and as an extension, crude demand.
Oil Price Pullback is Temporary
Most analysts see the drop in crude prices to be transitory and expect oil to bounce back shortly based on a slew of positive trends.
Most importantly, continued vaccine-related developments and their successful deployment around the world offer hope for an earlier-than-expected pickup in the commodity’s demand. The outlook has improved further after major oil producers maintained their output cuts till the end of April contrary to expectations of a slight increase. Recently, the OPEC+ alliance decided to continue withholding production by around 7 million barrels per day (or about 7% of the global consumption) through next month. Moreover, OPEC-kingpin Saudi Arabia pledged to extend its voluntary supply curbs of 1 million barrels per day. Easing coronavirus infections, the U.S. economy’s march toward a strong recovery, signs of robust demand in the world’s second-largest oil consumer, China, and the passage of the $1.9 trillion stimulus bill are the other positives in the oil story.
In fact, despite slipping from its multi-month highs, the Zacks Oil/Energy sector has gained 18.4% so far this year, handily outperforming the S&P 500 Index’s 4.5% appreciation. Further, the Energy Select Sector SPDR — an assortment of the largest U.S. energy companies — is up nearly 31% during this period to be at the top of the S&P sector standings.
Buy the Dip
With the energy picture generally looking up, savvy investors could use the pullback as an opportunity to buy their favourite stocks at a discount. We have narrowed down our search to five stocks that carry a Zacks Rank #1 (Strong Buy). Moreover, these energy stocks have witnessed robust earnings revisions in the past 30 days and have strong growth potential.
ExxonMobil (XOM - Free Report) : ExxonMobil’s bellwether status in the energy space, optimal integrated capital structure that has historically produced industry-leading returns and management’s track of capex discipline across the commodity price cycle make it a relatively lower-risk energy sector play. Notably, the company estimates gross recoverable resource of nearly 9 billion oil-equivalent barrels from the offshore Guyana discoveries. Moreover, compared to 2019, this energy firm projects annual structural expense savings of $6 billion by 2023, aiding the bottom line.
The company has an expected earnings growth rate of 981.82% for the current year. Over the past 30 days, ExxonMobil has seen the Zacks Consensus Estimate for its 2021 earnings improve 44.1%. The integrated major dropped 7.2% over the past two weeks.
Chevron (CVX - Free Report) : Chevron seems one of the best-placed global integrated oil firms to achieve sustainable production ramp-up. America’s No. 2energy company’s existing project pipeline is among the best in the industry, thanks to its premier position in the lucrative Permian Basin. Chevron’s Noble Energy takeover has expanded its footprint in the region and the DJ Basin along with the addition of cash-generating offshore assets in Israel.
Chevron has an expected earnings growth rate of 2,630% for the current year. Over the past 30 days, the company has seen the Zacks Consensus Estimate for its 2021 earnings surge 50.1%. Chevron saw its stock decline 5.8% over the past two weeks.
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 recently completed takeover of QEP Resources. A low-cost structure and investment grade balance sheet are the other positives in the Diamondback story.
The company has an expected earnings growth rate of 112.50% for the current year. Over the past 30 days, Diamondback has seen the Zacks Consensus Estimate for its 2021 earnings improve18.8%. The energy explorer dropped 9.9% over the past two weeks.
Ovintiv (OVV - Free Report) : An upstream operator, Ovintiv (formerly known as Encana) holds principal assets in the Anadarko Basin, located in the western and central parts of Oklahoma; the Permian Basin located in the western Texas and south eastern New Mexico; the Midland Basin in Texas; and the Montney Basin in western Canada. The company’s cost-saving initiatives remain on track with the excess cash flow set to go toward lowering of debt over the next few quarters.
Ovintiv has an expected earnings growth rate of 840% for the current year. Over the past 30 days, the company has seen the Zacks Consensus Estimate for its 2021 earnings surge 75%.Ovintiv saw its stock pushed down 5% over the past two weeks.
EOG Resources (EOG - Free Report) : EOG Resources has an attractive growth profile, a huge inventory of drilling opportunities, upper quartile returns and a disciplined management team. It is among the leading players in the Bakken play, the largest in the Eagle Ford and has significant acreage in the lucrative Permian Basin.
The company has an expected earnings growth rate of 234.93% for the current year. Over the past 30 days, EOG has seen the Zacks Consensus Estimate for its 2021 earnings improve 53.3%. The energy explorer’s stock fell 6.1% over the past two weeks.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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Exxon, Chevron & 3 Other Energy Stocks to Buy on the Dip
U.S. crude prices steadied on Friday to snap a five-session losing streak but still ended the week 6.4% lower, as concerns over the reimposition of lockdowns in Europe and safety issues associated with the AstraZeneca (AZN - Free Report) COVID-19 vaccine dented the outlook for oil demand recovery.
Futures in New York on Friday settled at $61.42 a barrel, while Brent — the international benchmark — closed at $64.53 a barrel, posting a weekly loss of 6.8%. Both contracts recorded their worst week since October.
Crude Hits a Speed Bump
Oil prices are under pressure over the past couple of weeks as a number of European nations have imposed lockdowns aimed at slowing the spread of a third wave of the contagion, thereby threatening the rebound in fuel demand. Further, a scare over blood clots related to the use of AstraZeneca vaccine saw several countries slow down/temporarily suspend its rollout, which compounded the bearish sentiment in the energy market. At the same time, U.S. Federal Reserve’s acknowledgement of inflation risks this year have made oil traders wary as this might lower consumer discretionary income, and as an extension, crude demand.
Oil Price Pullback is Temporary
Most analysts see the drop in crude prices to be transitory and expect oil to bounce back shortly based on a slew of positive trends.
Most importantly, continued vaccine-related developments and their successful deployment around the world offer hope for an earlier-than-expected pickup in the commodity’s demand. The outlook has improved further after major oil producers maintained their output cuts till the end of April contrary to expectations of a slight increase. Recently, the OPEC+ alliance decided to continue withholding production by around 7 million barrels per day (or about 7% of the global consumption) through next month. Moreover, OPEC-kingpin Saudi Arabia pledged to extend its voluntary supply curbs of 1 million barrels per day. Easing coronavirus infections, the U.S. economy’s march toward a strong recovery, signs of robust demand in the world’s second-largest oil consumer, China, and the passage of the $1.9 trillion stimulus bill are the other positives in the oil story.
In fact, despite slipping from its multi-month highs, the Zacks Oil/Energy sector has gained 18.4% so far this year, handily outperforming the S&P 500 Index’s 4.5% appreciation. Further, the Energy Select Sector SPDR — an assortment of the largest U.S. energy companies — is up nearly 31% during this period to be at the top of the S&P sector standings.
Buy the Dip
With the energy picture generally looking up, savvy investors could use the pullback as an opportunity to buy their favourite stocks at a discount. We have narrowed down our search to five stocks that carry a Zacks Rank #1 (Strong Buy). Moreover, these energy stocks have witnessed robust earnings revisions in the past 30 days and have strong growth potential.
You can see the complete list of today’s Zacks #1 Rank stocks here.
ExxonMobil (XOM - Free Report) : ExxonMobil’s bellwether status in the energy space, optimal integrated capital structure that has historically produced industry-leading returns and management’s track of capex discipline across the commodity price cycle make it a relatively lower-risk energy sector play. Notably, the company estimates gross recoverable resource of nearly 9 billion oil-equivalent barrels from the offshore Guyana discoveries. Moreover, compared to 2019, this energy firm projects annual structural expense savings of $6 billion by 2023, aiding the bottom line.
The company has an expected earnings growth rate of 981.82% for the current year. Over the past 30 days, ExxonMobil has seen the Zacks Consensus Estimate for its 2021 earnings improve 44.1%. The integrated major dropped 7.2% over the past two weeks.
Chevron (CVX - Free Report) : Chevron seems one of the best-placed global integrated oil firms to achieve sustainable production ramp-up. America’s No. 2energy company’s existing project pipeline is among the best in the industry, thanks to its premier position in the lucrative Permian Basin. Chevron’s Noble Energy takeover has expanded its footprint in the region and the DJ Basin along with the addition of cash-generating offshore assets in Israel.
Chevron has an expected earnings growth rate of 2,630% for the current year. Over the past 30 days, the company has seen the Zacks Consensus Estimate for its 2021 earnings surge 50.1%. Chevron saw its stock decline 5.8% over the past two weeks.
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 recently completed takeover of QEP Resources. A low-cost structure and investment grade balance sheet are the other positives in the Diamondback story.
The company has an expected earnings growth rate of 112.50% for the current year. Over the past 30 days, Diamondback has seen the Zacks Consensus Estimate for its 2021 earnings improve18.8%. The energy explorer dropped 9.9% over the past two weeks.
Ovintiv (OVV - Free Report) : An upstream operator, Ovintiv (formerly known as Encana) holds principal assets in the Anadarko Basin, located in the western and central parts of Oklahoma; the Permian Basin located in the western Texas and south eastern New Mexico; the Midland Basin in Texas; and the Montney Basin in western Canada. The company’s cost-saving initiatives remain on track with the excess cash flow set to go toward lowering of debt over the next few quarters.
Ovintiv has an expected earnings growth rate of 840% for the current year. Over the past 30 days, the company has seen the Zacks Consensus Estimate for its 2021 earnings surge 75%.Ovintiv saw its stock pushed down 5% over the past two weeks.
EOG Resources (EOG - Free Report) : EOG Resources has an attractive growth profile, a huge inventory of drilling opportunities, upper quartile returns and a disciplined management team. It is among the leading players in the Bakken play, the largest in the Eagle Ford and has significant acreage in the lucrative Permian Basin.
The company has an expected earnings growth rate of 234.93% for the current year. Over the past 30 days, EOG has seen the Zacks Consensus Estimate for its 2021 earnings improve 53.3%. The energy explorer’s stock fell 6.1% over the past two weeks.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2021 today >>