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3 Top Energy Stocks to Buy for the Second Half of 2023
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While Wall Street gave an impressive performance in the first half of 2023, the Oil/Energy sector faced challenges. However, with the recent improvements in oil and gas prices, it is expected to gain momentum in the second half of the year. In this context, Oceaneering International (OII - Free Report) , Murphy USA (MUSA - Free Report) and Civitas Resources (CIVI - Free Report) present investment opportunities for those looking to capitalize on the recovery.
Positive Momentum for Wall Street
Wall Street experienced a strong rebound in the first half of 2023, recovering from the disappointments of the previous year. The S&P 500 Index surged by 15.9% during this period, marking its best first half since 2019. This positive performance can be attributed to the steady decline in inflation rates and the Federal Reserve's decision to reduce the magnitude of interest rate hikes, which has favored U.S. stock markets. Consequently, the majority of stocks have witnessed significant growth during the January-June timeframe.
Challenges in the Oil/Energy Sector
One sector that lagged behind in the first half of 2023 was Oil/Energy. Despite the overall market rally, the space has faced challenges and struggled to participate in the first-half surge. The sector has experienced a total return of approximately (7%), as investors opted for safer assets due to concerns about a slowing global economy.
Ready for a Comeback?
Now, there are hints of a turnaround as oil and natural gas prices have shown signs of strength. Crude oil prices have surged to around $75 per barrel, supported by Saudi Arabia's pledge to extend its current 1 million barrel per day production cut through August, while natural gas futures are approaching the $3 mark on forecasts for hotter weather that should boost cooling demand.
The strength in commodity prices suggests that energy stocks are poised for a strong second half. Investors looking for opportunities in this sector should consider stocks with a favorable Zacks Rank.
Our Choices
We have narrowed our search to three energy firms that have strong potential for the rest of 2023. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Oceaneering International: A leading provider of integrated technology solutions, Oceaneering International is active at all phases of the offshore oilfield lifecycle. Oceaneering’s geographically diversified asset base — spread across the United States and the rest of the world — and its revenues — evenly split between international and domestic operations — lower its risk profile. The outlook for the #1 Ranked company’s ‘Subsea Robotics’ unit is particularly impressive. Besides, Oceaneering's strong relationships with high-quality customers provide revenue visibility and business certainty.
The 2023 Zacks Consensus Estimate for Houston, TX-based OII indicates 261.3% year-over-year earnings per share growth. Over the past 60 days, Oceaneering saw the Zacks Consensus Estimate for 2023 move up 6.7%. OII shares have gained 123.2% in a year.
Civitas Resources: Formerly known as Bonanza Creek Energy, Civitas Resources was formed out of the merger between Bonanza Creek Energy and Extraction Oil & Gas. CIVI’s high-quality asset base, disciplined capital allocation and fortress balance sheet allow it to maintain an attractive long-term cash flow profile. Of late, the company has entered the high-margin Permian Basin, gaining access to the region’s premium, low-breakeven inventory.
Over the past 60 days, this Denver, CO-based firm saw the Zacks Consensus Estimate for 2023 move up 15.4%. CIVI, with a Zacks Rank of 1, beat the Zacks Consensus Estimate for earnings in two of the last four quarters and missed in the other two. It has a trailing four-quarter earnings surprise of roughly 4.5%, on average.
Murphy USA: This is a leading independent retailer of motor fuel and convenience merchandise in the United States. The proximity of Murphy USA’s fuel stations to Walmart supercenters helps the company to leverage the strong and consistent traffic that these stores attract. MUSA’s acquisition of QuickChek Corporation — a family-owned food and beverage chain located — is expected to help improve its offerings.
It is valued at some $6.6 billion. The Zacks Consensus Estimate for MUSA's 2023 earnings has been revised 8.3% upward over the past 60 days. The Zacks #2 Ranked Murphy USA beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed in the other. MUSA shares have gained 15.5% in a year.
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3 Top Energy Stocks to Buy for the Second Half of 2023
While Wall Street gave an impressive performance in the first half of 2023, the Oil/Energy sector faced challenges. However, with the recent improvements in oil and gas prices, it is expected to gain momentum in the second half of the year. In this context, Oceaneering International (OII - Free Report) , Murphy USA (MUSA - Free Report) and Civitas Resources (CIVI - Free Report) present investment opportunities for those looking to capitalize on the recovery.
Positive Momentum for Wall Street
Wall Street experienced a strong rebound in the first half of 2023, recovering from the disappointments of the previous year. The S&P 500 Index surged by 15.9% during this period, marking its best first half since 2019. This positive performance can be attributed to the steady decline in inflation rates and the Federal Reserve's decision to reduce the magnitude of interest rate hikes, which has favored U.S. stock markets. Consequently, the majority of stocks have witnessed significant growth during the January-June timeframe.
Challenges in the Oil/Energy Sector
One sector that lagged behind in the first half of 2023 was Oil/Energy. Despite the overall market rally, the space has faced challenges and struggled to participate in the first-half surge. The sector has experienced a total return of approximately (7%), as investors opted for safer assets due to concerns about a slowing global economy.
Ready for a Comeback?
Now, there are hints of a turnaround as oil and natural gas prices have shown signs of strength. Crude oil prices have surged to around $75 per barrel, supported by Saudi Arabia's pledge to extend its current 1 million barrel per day production cut through August, while natural gas futures are approaching the $3 mark on forecasts for hotter weather that should boost cooling demand.
The strength in commodity prices suggests that energy stocks are poised for a strong second half. Investors looking for opportunities in this sector should consider stocks with a favorable Zacks Rank.
Our Choices
We have narrowed our search to three energy firms that have strong potential for the rest of 2023. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Oceaneering International: A leading provider of integrated technology solutions, Oceaneering International is active at all phases of the offshore oilfield lifecycle. Oceaneering’s geographically diversified asset base — spread across the United States and the rest of the world — and its revenues — evenly split between international and domestic operations — lower its risk profile. The outlook for the #1 Ranked company’s ‘Subsea Robotics’ unit is particularly impressive. Besides, Oceaneering's strong relationships with high-quality customers provide revenue visibility and business certainty.
The 2023 Zacks Consensus Estimate for Houston, TX-based OII indicates 261.3% year-over-year earnings per share growth. Over the past 60 days, Oceaneering saw the Zacks Consensus Estimate for 2023 move up 6.7%. OII shares have gained 123.2% in a year.
Civitas Resources: Formerly known as Bonanza Creek Energy, Civitas Resources was formed out of the merger between Bonanza Creek Energy and Extraction Oil & Gas. CIVI’s high-quality asset base, disciplined capital allocation and fortress balance sheet allow it to maintain an attractive long-term cash flow profile. Of late, the company has entered the high-margin Permian Basin, gaining access to the region’s premium, low-breakeven inventory.
Over the past 60 days, this Denver, CO-based firm saw the Zacks Consensus Estimate for 2023 move up 15.4%. CIVI, with a Zacks Rank of 1, beat the Zacks Consensus Estimate for earnings in two of the last four quarters and missed in the other two. It has a trailing four-quarter earnings surprise of roughly 4.5%, on average.
Murphy USA: This is a leading independent retailer of motor fuel and convenience merchandise in the United States. The proximity of Murphy USA’s fuel stations to Walmart supercenters helps the company to leverage the strong and consistent traffic that these stores attract. MUSA’s acquisition of QuickChek Corporation — a family-owned food and beverage chain located — is expected to help improve its offerings.
It is valued at some $6.6 billion. The Zacks Consensus Estimate for MUSA's 2023 earnings has been revised 8.3% upward over the past 60 days. The Zacks #2 Ranked Murphy USA beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed in the other. MUSA shares have gained 15.5% in a year.