After suffering a serious setback last year, energy stocks have witnessed a solid rally this year thanks to a rebound in oil prices. Rising demand from reopening economic activities and prolonged supply cuts by the major oil producing countries have driven a dramatic increase in oil prices this year.
After Energy Information Administration data revealed a substantial decline in crude and gasoline inventories, oil prices rose last week, rebounding from early losses. Along with rising demand from reopening economies, disagreements among members of the Organization of Petroleum Exporting Countries (OPEC), Russia, and other producers over supply strategy might keep driving oil prices higher in the coming months. According to EIA’s latest short-term energy outlook, global oil consumption is expected to increase by 6% from 2020 levels in 2021 and by an additional 4% in 2022. This should bode well for energy companies.
Given this backdrop, we think energy stocks ARC Resources Ltd. (AETUF) and CONSOL Energy Inc. (CEIX) could be solid bets now because they are poised to cash in on the overall energy sector’s growth.
ARC Resources Ltd. (AETUF)
AETUF is an oil and gas company located in Calgary, Canada. The Company's activities are focused on conventional crude oil, condensate, natural gas liquids (NGLs), and natural gas exploration, development, and production. It holds interests in Montney properties, located in northeast British Columbia and northern Alberta, and in Pembina Cardium properties in central Alberta.
In April, AETUF announced that it had completed a merger with Montney and Seven Generations Energy Ltd., creating the premier Montney producer and a pioneer in responsible energy development. This has made AETUF Canada’s largest condensate producer, third-largest natural gas producer, and sixth-largest upstream energy company.
During the first quarter, ended March 31, 2021, AETUF’s revenue increased 93.2% year-over-year to CAD518.6 million ($415.22 million). Its net income came in at CAD178 million ($142.52 million) for this period, compared to a CAD$558.4 million ($447.09 million) net loss in the first quarter of 2020. The company’s EPS came in at CAD0.5 ($0.4), compared to a CAD$1.58 ($1.27) loss per share in the prior year period. Furthermore, the company’s cash flow from operating activities increased 52.1% year-over-year to CAD278.4 million ($222.91 million) over this period.
A $0.95 consensus EPS estimate for next year represents a 2.13% improvement year-over-year. The $2.83 billion consensus revenue estimate for the current year represents a 208.1% increase from the same period last year. The stock has gained 130.7% over the past year and 69.5% year-to-date.
AETUF’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
AETUF is also rated an A for Momentum, and a B for Growth and Sentiment. Within the Energy- Oil & Gas industry, it is ranked #1 of 95 stocks.
To see additional POWR Ratings for Stability, Quality, and Value for AETUF, click here.
CONSOL Energy Inc. (CEIX)
CEIX, is a high-Btu bituminous thermal and crossover metallurgical coal producer and exporter. The company mines, prepares, and markets thermal coal, provides coal export terminal services, and develops the Itmann Mine and Greenfield reserves. It also has a stake in the Pennsylvania Mining Complex (PMC) and adjacent coal assets, as well as the Port of Baltimore’s terminal activities. CEIX is based in Canonsburg, Pa.
During the first quarter, ended March 31, 2021, CEIX’s revenue and other income increased 17.5% year-over-year to $342.15 million. The company’s net income increased significantly year-over-year to $26.40 million, while its EPS grew 733.4% from the prior-year quarter to $0.75. Its adjusted EBITDA increased 69.6% year-over-year to $106.7 million over this period.
CEIX is expected to witness 18.4% revenue growth for the current year. Its EPS is estimated to increase 524.3% year-over-year to $1.57 in 2021. Over the past year, CEIX’s stock has gained 255.1%. Furthermore, it has gained 160.1% year-to-date.
CEIX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has an A grade for Momentum, and a B for Value and Growth. In the Energy- Oil & Gas industry, it is ranked #3 of 95 stocks.
In total, we rate CEIX on eight different levels. Beyond what we've stated above, we have also given CEIX grades for Sentiment, Stability, and Quality. Get all the CEIX ratings here.
Note that CEIX is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
AETUF shares were trading at $7.86 per share on Wednesday afternoon, down $0.19 (-2.34%). Year-to-date, AETUF has gained 65.47%, versus a 17.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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