Last year was a huge year for the stock market, but not all market sectors were in on the fun. Once again, 2019 was a disappointing year for energy investors. The energy sector was the worst-performing market sector of the year. The global oil market is still bouncing back from its 2014 crash, and natural gas prices just hit new multiyear lows. But despite the difficult environment for energy stocks, there are a handful of winners in the group. Here are nine energy stocks to buy that have generated positive returns for investors over the past year, according to CFRA.
CNOOC (CEO) is an oil and gas exploration and production company based in China that negotiates with international oil companies for offshore production sharing contracts. Analyst Ahmad Halim says production growth and cost controls should help CNOOC offset weaker crude oil prices, and a strong pipeline of projects should support output over the next two years. CNOOC also pays an impressive 5.5% dividend. Despite trade war concerns and the challenging energy environment, CNOOC shares are up 4.2% in the past year. CFRA has a “strong buy” rating and $179 price target for CEO stock.
Helix Energy Solutions Group
Helix Energy Solutions (HLX) is an offshore oil and gas services company. Analyst Paige Meyer says offshore rig operators have postponed well intervention projects for years as they weather the difficult environment, but that work cannot be delayed forever. Even if oil prices remain depressed, offshore rig counts are on the rise. Meyer projects revenue growth will accelerate from 1% in 2019 to 9% in 2020 due to higher customer budgets. Helix was one of the top performers in the energy sector in the past year, gaining 31.7%. CFRA has a “buy” rating and $11 price target for HLX stock.
Kinder Morgan (KMI) is one of the largest midstream energy companies. Analyst Stewart Glickman says Kinder Morgan has adapted to the times following the oil market collapse and has become a conservatively run, self-sufficient pipeline growth investment. In addition to the stock’s 23.4% gain in the past year, investors have enjoyed a 4.6% dividend yield. Glickman says he wouldn’t be surprised to see an additional dividend hike in 2020 given the company’s robust cash flow and solid balance sheet. CFRA has a “buy” rating and $23 price target for KMI stock.
Magellan Midstream Partners
Magellan Midstream Partners (MMP) is a refined products and crude oil pipeline master limited partnership. Glickman says Magellan is well-positioned to capitalize on a surge in U.S. liquids exports. He says rising U.S. shale crude oil volumes will drive higher refined product volumes, which should create demand for Magellan. Like many other MLPs, Magellan pays an enticing distribution yield of 6.3%. Magellan raised its distribution by 4.3% in the most recent quarter, and Glickman says it should continue to grow distributions over time. CFRA has a “strong buy” rating and $80 price target for MMP stock.
Pembina Pipeline Corp.
Pembina Pipeline (PBA) is a Canadian midstream services and transportation company. Meyer says Canada has a strong demand for additional pipelines. Meyer is projecting revenue growth will increase from 0.5% in 2019 to 7.1% in 2020. At the same time, Meyer projects earnings before interest, taxes, depreciation and amortization margins will expand from 26% in 2016 to 41.4% in 2020. In addition to Pembina’s 4.4% dividend yield, the stock is up 16.8% in the past 12 months. CFRA has a “buy” rating and $42.06 price target for PBA stock.
Pioneer Natural Resources Co.
Pioneer Natural Resources (PXD) is an oil and natural gas producer that operated primarily in the Permian Basin and Eagle Ford. Glickman says Pioneer’s focus on oil is driving a stronger financial performance than its gas-heavy peers. Pioneer shares are also trading at about a 35% discount to their long-term average forward earnings and cash flow multiples. In November, Pioneer said it plans to add at least two rigs per year annually to maintain a production growth rate in the mid-teens. CFRA has a “buy” rating and $150 price target for PXD stock.
Suncor Energy (SU) is a Canadian oil exploration and production company that produces primarily from oil sands projects. Meyer says Suncor’s assets have a long lifetime, suggesting stable cash flow and a high-visibility financial outlook. Meyer is projecting flat revenue growth in 2020 and 5% annual production growth through 2023. However, Suncor is highly leveraged to crude oil prices, and Meyer estimates every additional $1 in Brent crude prices translates to a $225 million increase in Suncor’s cash flow. The stock also pays a 3.8% dividend. CFRA has a “buy” rating and $35 price target for SU stock.
Valero Energy Corp.
Valero Energy (VLO) owns 13 refineries in the U.S., Canada and Europe and is one of the largest independent public petroleum refiners. Glickman says Valero’s U.S. Gulf Coast presence is attractive to key export markets in Europe and South America. He says Valero’s margins should get a boost in 2020 due to new marine sulfur regulations that went into effect on Jan. 1. CFRA is projecting earnings per share will more than double from $4.77 in 2019 to $9.71 in 2020. CFRA has a “buy” rating and $105 price target for VLO stock.
WPX Energy (WPX) is an oil and gas producer with assets in the Delaware, Williston and San Juan basins. Meyer says nearly $1 billion in recent noncore asset sales helped WPX shore up its balance sheet and pay for the $2.5 billion acquisition of Felix Energy in December. Meyer says it's a fair price for prime Delaware acreage. WPX is now repositioned with a focus on high-margin and liquids-rich acreage. Meyer projects the Felix acquisition will drive 22% revenue growth and boost production by 33% in 2020. CFRA has a “buy” rating and $14 price target for WPX stock.
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