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Brokers Love These Energy Stocks, It's Time You Take a Look

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The Oil/Energy sector is well-known for its inherent unpredictability, with frequent spikes and falls. While significant price fluctuations have always been a hallmark of investments in oil and natural gas, the level of uncertainty has significantly increased in recent years, particularly following the COVID-19 pandemic.

This volatility is a reflection of substantial uncertainty in demand/supply fundamentals, with the companies’ profits often depending on commodity prices. Headwinds across the political spectrum and certain news headlines or events can always threaten supply or change anticipated demand. All these call for an increased focus on stock selection.

For novice investors, the volatility of the energy market can make investing seem risky and anxiety-inducing. However, stocks like Halliburton (HAL - Free Report) , Valero Energy (VLO - Free Report) and Targa Resources (TRGP - Free Report) are worth considering due to brokers' confidence in them. Although these companies currently carry a Zacks Rank #3 (Hold), brokers' optimism suggests underlying positive trends.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Why is it Desirable to Follow Expert Opinion? 

The volatility and uncertainty of oil prices make investment decisions difficult for individuals. With the future direction of the commodity’s movement being anybody's guess, it might be wise to go ahead with stocks preferred by analysts who have deep fundamental knowledge and understanding of the industry and its companies.

Stocks with brokerage upgrades are often in for a good day and probably more. Consequently, a downgrade may indicate rough days ahead. Whatever the movement, the market tends to react to it. Also, research shows that stocks with broker rating upgrades outperform those that aren't upgraded, and they almost certainly record better results than stocks that get downgraded.

3 Broker-Favored Stocks Worth Keeping on One’s Radar

With the help of the Zacks Stock Screener, we have selected three stocks that have been given a Strong Buy or Buy rating by 75% or more brokers.

Halliburton: Houston, TX-based Halliburton is one of the largest oilfield service providers in the world, offering a variety of equipment, maintenance, and engineering and construction services to the energy, industrial and government sectors.

Investors should know that 18 of the 20 brokers providing data to Zacks on Halliburton’s stock have Strong Buy recommendations. The other three ratings are a Buy and a Hold, giving the company an attractive average brokerage recommendation (“ABR”) of 1.15 on a scale of 1 to 5 (Strong Buy to Strong Sell).

Annual earnings are forecast to go up 8.3% this year and rise another 17.9% in 2025 to $4 per share. Moreover, sales are projected to climb 5.6% in 2024 and rise another 8.3% in 2025 to $26.3 billion. Finally, the average price target of Zacks is pegged at $48.40 a share, which suggests a 34.5% upside for the HAL stock from the current levels. So far this year, the Halliburton stock has edged down 0.4%, but an upside looks more likely.

Valero Energy: San Antonio, TX-based Valero Energy is the largest independent refiner and marketer of petroleum products in the United States. The company has a refining capacity of 3.1 million barrels per day across 15 refineries located throughout the United States, Canada and the United Kingdom.

Valero’s stock has catapulted more than 25% this year. The company’s performance continues to impress, coming within 7% less than the Zacks average price target of $174.88 at the moment, despite decreasing 2.7% over the past month.

Even after an extensive year-to-date rally, VLO’s stock has only one Strong Sell broker rating, with 12 of them still strongly recommending the company’s shares. Even after including four hold ratings, Valero’s 1.71 ABR is intriguing. As far as earnings are concerned, VLO’s first-quarter earnings of $3.82 per share beat the consensus estimate of $3.18 a share by 20.1%.

Targa Resources: Targa Resources is a premier energy infrastructure company. A leading provider of integrated midstream services in North America, this Houston, TX-based operator primarily derives its revenues from gathering, compressing, treating, processing and selling natural gas.

An under-the-radar energy stock, TRGP has a very favorable ABR of 1.11. Currently, 16 brokers have a Strong Buy rating on Targa Resources’ stock with two Buy ratings. The company has lost 2.6% year to date.

Total sales are projected to jump 9.7% in 2024 and another 7.3% in 2025 to $18.9 billion. Earnings are anticipated to rise 53.6% this year and jump 23.9% in 2025 to $6.97 a share.

See More Zacks Research for These Tickers

Normally $25 each - click below to receive one report FREE:

Halliburton Company (HAL) - free report >>

Valero Energy Corporation (VLO) - free report >>

Targa Resources, Inc. (TRGP) - free report >>

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