According to the data released by the Energy Information Administration, fuel demand has reached its highest level since March 2020, propelling oil prices to a 10% gain last week. Furthermore, Hurricane Ida is expected to keep crude and retail gasoline prices elevated as refineries remain shut across the region. Consequently, analysts estimate gasoline prices will rise 5 -10 cents per gallon by the Labor Day weekend.
Thus, we think fundamentally sound energy stocks Cimarex Energy Co. (XEC) and National Fuel Gas Company (NFG) could soar in price in the near term.
However, the resurgence of the COVID-19 cases is expected to make oil prices volatile in the near term. Thus, we recommend avoiding fundamentally weak energy stocks EQT Corporation (EQT) and U.S. Energy Corp. (USEG).
Stocks to Buy:
Cimarex Energy Co. (XEC)
XEC is an independent oil and gas exploration and production company that operates primarily in Texas, Oklahoma, and New Mexico. It is headquartered in Denver, Colo.
On August 31, XEC declared a $20.3125 per share dividend on its 8⅛%Series A cumulative perpetual convertible preferred stock. The dividend is payable on October 15, 2021.
XEC’s revenues increased 185.7% year-over-year to $712.38 million in its fiscal second quarter, ended June 30. Its operating income grew 113.5% from its year-ago value to $159.91 million, while its net income improved 112.3% year-over-year to $113.39 million. The company’s EPS increased 111.9% year-over-year to $1.10.
Analysts expect XEC’s revenues to increase 92.7% year-over-year to $749.89 million in the current quarter, ending September 2021. The $2.66 consensus EPS estimate for the current quarter indicates a 421.6% rise from the same period last year. Shares of XEC have gained 126.9% in price over the past year and 74.8% year-to-date.
It is no surprise that XEC has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a grade of A for Momentum and Quality, and a grade B for Growth. Among the 93 stocks in the Energy - Oil & Gas industry, XEC is ranked #13.
To see additional XEC ratings for Sentiment, Stability, and Value, click here.
National Fuel Gas Company (NFG)
NFG is a diversified energy company. It operates through four segments: Exploration and Production; Pipeline and Storage; Gathering, and Utility. It is based in Williamsville, N.Y.
On June 17, NFG approved a 2.2% increase in the company’s common stock dividend, raising the quarterly rate from 44.5 cents per share as approved in June 2020 to 45.5 cents per share for an annual rate of $1.82 per share. The company has a record of 119 consecutive years of dividend payments, and an increase in its annual dividend for 51 straight years.
For its fiscal third quarter, ended June 30, NFG’s operating revenue increased 22.1% year-over-year to $394.40 million. Its operating income stood at $150.07 million, up 86.7% from the same period last year. Its net income attributable for common stock grew 109.6% from its year-ago value to $86.48 million. The company’s EPS has increased 100% year-over-year to $0.94.
A $420.44 million consensus revenue estimate for its fiscal fourth quarter (ending September 2021) indicates a 46% increase year-over-year. The Street expects the company’s EPS to rise 75% from the prior-year quarter to $0.70 in the current quarter. NFG has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters.
Over the past year, NFG gained 17.6% in price to close yesterday’s trading session at $52.11. The stock has gained 26.7% year-to-date.
The company’s strong growth prospects are reflected in its POWR ratings. NFG has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. NFG also has a B grade for Growth and Quality. It is ranked #17 in the Energy - Oil & Gas industry.
Click here to view additional NFG ratings for Momentum, Value, Sentiment, and Stability.
Stocks to Avoid:
EQT Corporation (EQT)
EQT is a Pittsburgh, Pa.-based natural gas production company. The company produces natural gas, natural gas liquids (NGLs), and crude oil.
On June 29, Halper Sadeh LLP, a global investor rights law firm, announced that it is investigating EQT concerning potential violations of federal securities laws and/or breaches of fiduciary duties relating to its merger with Alta Resources Development, LLC. A few other law firms are also investigating the issue.
EQT’s total operating revenues came in at a negative $260.12 million, representing a 149.4% decline year-over-year in its fiscal second quarter, ended June 30. Its operating loss grew 214.7% from its year-ago value to $1.22 billion, while its net loss increased 256% year-over-year to $936.46 million over the period. The company’s loss per share increased 225.3% year-over-year to $3.35.
A $1.07 billion consensus revenue estimate for its fiscal third quarter, ending September 2021 indicates a 25.6% improvement from the same period last year. However, its EPS is expected to remain negative in the current quarter. Over the past month, EQT gained marginally in price to close yesterday’s trading session at $18.75.
EQT has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. In addition, EQT has a D grade for Value, Stability, Sentiment, and Quality. EQT is ranked #85 in the Energy - Oil & Gas industry.
Beyond what we’ve stated above, we have also rated EQT for Growth and Momentum. Click here to view all EQT ratings.
U.S. Energy Corp. (USEG)
USEG is an independent energy company focused on acquiring, exploring, and developing oil and natural gas properties in the United States. It holds interests in various oil and gas properties in the Williston Basin in North Dakota, the Permian Basin in New Mexico, the Powder River Basin in Wyoming, and Texas Gulf Coast.
USEG’s net loss declined 94.3% year-over-year to $0.21 million in its fiscal second quarter, ended June 30. Also, for the six months ended June 30, the company’s net cash used in operating activities increased 25.7% year-over-year to $0.59 million.
USEG has shed 24.2% in price over the past year and 13.5% over the past six months to close yesterday’s trading session at $4.10.
The stock has an overall D rating, translating to Sell in our POWR Ratings system. In addition, USEG has an F grade for Stability, and a D for Value. It is ranked #83 in the Energy - Oil & Gas industry.
Get additional POWR Ratings for Growth, Sentiment, Momentum, and Quality, here.
EQT shares were trading at $19.81 per share on Thursday afternoon, up $1.06 (+5.65%). Year-to-date, EQT has gained 55.86%, versus a 21.91% 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.
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