The recent sell-off in stocks has seen the S&P 500 lose 9.4% in the past month, with treasury yield slowly declining and some commodities trending downward as well. However, oil and gas prices are still high due to Russia’s unprovoked invasion of Ukraine which is, in turn, lifting up the energy sector.
From 2000 to 2022, the energy sector as a percentage of the market capitalization of the S&P 500 is 60% lower today than it was in 2010. Nevertheless, the sector is trending up at the moment despite the rising inflation.
Thus, Finbold has carried out an in-depth analysis of three stocks that might benefit from high energy prices while we move to the end of Q2 2022.
Exxon Mobil (NYSE: XOM)
Tailwinds are expected of companies like XOM as the commodity price volatility might not have a lot of impact on the earnings of the company. Despite missing earnings per share estimates by analysts, XOM managed to beat revenue by $5.62 billion or 53% increase year-over-year.
Exxon has managed to pay a strong dividend, currently yielding 4.08%, for 40 consecutive years. This should continue in the near future if revenues keep on rising as the right they’re now. Shares are up 43% year-to-date (YTD), with volume spikes seen in late March, which helped the stock create an upper resistance line above $90.
On Wall Street, analysts give the shares a moderate buy rating agreeing that, on average, for the next 12 months, the price could rise by 3.33% to reach $93.98 from the current trading price of $90.95. More bullish analysts see the stock shooting up by over 30% to $120.
HF Sinclair Corporation (NYSE: DINO)
Refiners might be embarking on a golden age for their services as current bottlenecks for energy prices are tied to refiners. DINO is a newer entity on the market created in March by the merger of Holly Frontier Corp and Holly Energy Partners now capable of refining, marketing, creating lubricants, and is involved in renewables.
Revenues seem to have been a blowout, $7.46 billion were reported an increase of 113% year-on-year (YoY). Earnings per share for Q1 2022 were $0.99 beating estimates by $0.85. The company also reinstated the dividend with a 3.7% yield, with management looking to return roughly $1 billion to shareholders.
Shares have also been rising steadily ever since the merger was completed in March of this year, up 39% YTD. Shares are above all daily SMAs with higher volumes noticed in the last couple of sessions, seeking a new resistance line to the downside.
Elsewhere, analysts give the shares a moderate buy rating. The average price prediction for the next 12 months is $48, which is only 1.78% above the current trading price of $47.16, with more bullish analysts seeing the price action going to $56.
Conoco Phillips (NYSE: COP)
The company reported earnings on May 5, beating analysts’ expectations and increasing shareholders’ returns. Earnings per share were $3.27 compared to the expected $3.17, while cash flow generated was at $5.1 billion. The board announced a $1.16 quarterly dividend which increases the yield to 4.5% for the shares.
Guidance for Q2 was also positive, with increased production and earnings expected. The shares have risen 43% YTD creating a double top more recently on the daily chart. Shares have had a tremendous run in 2022 which would have represented a good opportunity for momentum investors.
On Wall Street, the general consensus is that the shares are a strong buy, with the average price for the next 12 months seen at $128.69. This price would represent an increase of 21.98% from the current trading price of $105.50.
Energy is the backbone of any economy, and right now, due to various geopolitical factors, it is trending as an investment sector. The three companies above all have solid earnings and predictions for cash flow and production for Q2 2022. Therefore having them on a watchlist could pay off in the near term.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.