Oil prices have been declining from their recent multi-year highs as rising COVID-19 cases threaten global oil demand. However, solid progress on the vaccination front and what seems like a resilient global economic recovery should prevent oil prices from falling significantly. Many analysts expect robust demand growth to continue through the end of the year, which should allow oil prices to remain stable in the coming months. Both the International Energy Agency (IEA) and OPEC expect the world’s thirst for oil to return to pre-pandemic highs in the second half of next year.
As the U.S. economic recovery continues with the recent approval by the Senate of a large infrastructure spending bill, provisions for the development of the energy sector should facilitate the industry’s long-term growth despite short-term headwinds.
Given this backdrop, Wall Street analysts predict energy stocks Suncor Energy Inc. (SU), Ovintiv Inc. (OVV), PDC Energy, Inc. (PDCE), and Matador Resources Company (MTDR) will rally by more than 50% in the coming months.
Suncor Energy Inc. (SU)
Suncor Energy Inc. in Calgary, Canada, is an integrated energy company that explores for, acquires, produces, refines, and markets crude oil in Canada and internationally. It operates in Oil Sands; Exploration and Production; Refining and Marketing; and Corporate and Eliminations segments.
On May 11, SU collaborated with ATCO Ltd. (ACLLF) on early-stage design and engineering for a potential clean hydrogen project near Fort Saskatchewan, Alberta. The company expects 85% of the produced clean hydrogen would be used to supply existing energy demand. This collaboration should allow SU to leverage ATCO's extensive midstream gas experience and emerge as a significant player in hydrogen production and clean energy space.
SU’s net earnings increased 241.4% year-over-year to CAD868 million ($691.90 million) in its fiscal second quarter, ended June 30. Its operating earnings grew 153.7% from its year-ago value to CAD722 million ($575.52 million).
Analysts expect SU’s revenues to increase 60.2% year-over-year to $31.29 billion in its fiscal period ending December 2021. The company’s revenue is also expected to rise 6.4% from the current year to $33.28 billion in the following year. The $2.73 consensus EPS estimate for the next year indicates a 22.1% rise from the current year. Shares of SU have gained 13% over the past year, and 14.4% year-to-date.
Among the 14 Wall Street analysts that rated SU, 10 rated it Buy while four rated it Hold. The $29.08 median price target indicates a potential 51.5% upside from its last closing price of $19.19. The 12-month price targets range from a low of $25.57 to a high of $33.56.
Ovintiv Inc. (OVV)
OVV, together with its subsidiaries, explores for, develops, produces, and markets natural gas, oil, and natural gas liquids. The Calgary, Canada company is focused on developing its multi-basin portfolio of oil and natural gas assets located in the United States and Canada.
On July 15, OVV announced the redemption of $517,823,000 in outstanding 3.90% notes due 2021. The notes are to be redeemed on August 16, 2021.
OVV’ non-GAAP free cash flow increased 573.1% year-over-year to $350 million in its fiscal second quarter, ended June 30. Its non-GAAP operating earnings grew 361.3% from its year-ago value to $290 million.
The Street expects OVV’s revenues to rise 20.9% year-over-year to $7.36 billion in its fiscal period ending December 2021. The $4.79 consensus EPS estimate for the current year indicates a 1,268.5% improvement year-over-year. Also, OVV surpassed consensus EPS estimates in three out of the trailing four quarters. Shares of OVV have gained 108.2% over the past year and 68.9% year-to-date.
Of 14 Wall Street analysts that rated OVV, 12 it Buy, while two rated it Hold. The $40.11 median price target f indicates a potential 65.3% upside from its last closing price of $24.26. The 12-month price targets range from a low of $29.57 to a high of $54.00.
Note that OVV is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
PDC Energy, Inc. (PDCE)
PDCE operates as an independent exploration and production company, which acquires, explores for, develops, and produces crude oil, natural gas, and natural gas liquids in the United States. PDCE is based in Denver, Colo.
On May 27, PDCE declared a $0.12 quarterly cash dividend per share, which was paid on June 24, 2021.
PCDE’s adjusted net income increased 1,104.3% year-over-year to $166.20 million in its fiscal second quarter, ended June 30. Its adjusted cash flow from operations grew 88.8% from its year-ago value to $343 million. The company’s adjusted EPS increased 1,085.7% year-over-year to $1.66.
A $551.66 million consensus revenue estimate for its fiscal third quarter, ending September 2021, indicates a 121.4% improvement from the same period last year. Analysts expect the company’s EPS to come in at $1.68 in the current quarter, indicating a 61.2% rise year-over-year. Furthermore, PDCE surpassed the Street’s EPS estimates in each of the trailing four quarters, which is impressive. PDCE has gained 94% year-to-date. The stock gained 147.2% over the past year.
All six Wall Street analysts that rated PDCE, rated it Buy. The $62.50 median price target indicates a potential 57% upside from its $39.82 last closing price. The 12-month price targets range from a low of $55.00 to a high of $70.00.
Matador Resources Company (MTDR)
Matador Resources Company in Dallas, Tex., is an independent energy company that explores for, develops, produces, and acquires oil and natural gas resources in the United States. It operates in two segments: Exploration and Production; and Midstream.
On June 29, MTDR announced a $75 million increase in the lender commitments under San Mateo’s revolving credit facility. San Mateo is the company’s midstream joint venture, owned 51% by MTDR and 49% by Five Point Energy LLC. This increase in lender commitments to San Mateo’s credit facility should provide the company with greater operating and financial flexibility.
MTDR’s total revenues increased 468.1% year-over-year to $357.43 million in its fiscal second quarter, ended June 30. Its operating income stood at $145.11 million, up 133.3% from the same period last year. Its net income grew 135.2% from its year-ago value to $121.83 million. The company’s EPS increased 129.3% year-over-year to $0.89.
A $364.16 million consensus revenue estimate for its fiscal third quarter (ending September 2021) indicates a 79.1% increase year-over-year. The Street expects the company’s EPS to rise 819.7% from the prior-year quarter to $0.92 in the current quarter. MTDR has an impressive earnings surprise history as well; it beat the consensus EPS estimates in each of the trailing four quarters.
Over the past year, MTDR gained 187.5% to close yesterday’s trading session at $27.60. The stock gained 128.9% year-to-date.
The six Wall Street analysts that rated MTDR, rated it Buy. The $41.50 median price target indicates a potential 50.4% upside from its last closing price. The 12-month price targets range from a low of $33.00 to a high of $50.00.
SU shares were trading at $18.85 per share on Monday afternoon, down $0.34 (-1.77%). Year-to-date, SU has gained 12.34%, versus a 20.33% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.4 Energy Stocks Wall Street Predicts Will Rally by More Than 50% appeared first on StockNews.com