Are These 3 Energy Stocks Set for Year-End Success?

With the global demand for oil and natural gas soaring and tightened supplies instigating high oil and gas prices, the energy sector’s outlook appears robust. With such promising growth potential for the industry, quality energy stocks Baker Hughes Company (BKR), Sasol Limited (SSL), and CrossAmerica Partners LP (CAPL), poised for year-end successes, could be solid buys now. Read on….

Despite the global push toward sustainability, the resilient oil and gas demand signifies a potential escalation in non-renewable resource consumption. Given this backdrop, it could be wise to add fundamentally robust energy stocks Baker Hughes Company (BKR), Sasol Limited (SSL), and CrossAmerica Partners LP (CAPL) to your portfolio now.

Nations worldwide have pledged to achieve net-zero emissions, intensifying the transition toward renewable energy. Yet, despite this notable shift toward cleaner energy alternatives, the global oil and gas demand is projected to remain strong. In 2024, the International Energy Agency (IEA) expects global oil demand to increase by 930,000 bpd.

Forecasters predict milder temperatures up to December 23. However, customary cooling patterns might stimulate increased U.S. gas demand within the Lower 48 states, including export demands.

The U.S. is on the brink of surpassing Australia and Qatar to become the leading global LNG supplier by 2023. Escalating oil prices, distribution interruptions, and sanctions related to the ongoing Ukraine conflict have magnified the international demand for U.S. exports.

Oil pricing could increase further due to geopolitical tensions and Saudi Arabia and Russia’s voluntary production cuts. UBS Group AG analysts and The Goldman Sachs Group, Inc. anticipate a possible rise in oil prices triggered by these voluntary restrictions. Predicted Brent oil prices for 2024 are expected to fluctuate between $80 and $100.

Given the industry tailwinds, it’s time to examine the fundamentals of the three stocks within the energy industry.

Baker Hughes Company (BKR)

BKR provides a portfolio of technologies and services to energy and industrial value chains worldwide. It operates through two segments: Oilfield Services & Equipment (OFSE) and Industrial & Energy Technology (IET). 

On November 17, BKR paid a quarterly cash dividend of $0.20 per share of Class A common stock. The company has paid dividends for 34 consecutive years.

Its annualized dividend rate of $0.80 per share translates to a dividend yield of 2.38% on the current share price. Its four-year average yield is 3.66%. BKR’s dividend payments have grown at CAGRs of 2.7% and 1.6% over the past three and five years, respectively.

On November 2, BKR’s Akastor ASA’s 50% owned affiliate HMH Holding B.V. successfully completed a $200 million senior secured bond issue with a tenor of 3 years and a fixed coupon of 9.88% per annum.

The net proceeds from the bonds will be applied toward (i) settlement in full of HMH’s existing $150 million senior secured bond issue, (ii) full repayment of existing bank borrowings, and (iii) general corporate purposes.

BKR’s trailing-12-month cash from operations of $3.03 billion is 352.4% higher than the industry average of $669.40 million, while its trailing-12-month asset turnover ratio of 0.71x is 28.7% higher than the industry average of 0.55x.

In the fiscal third quarter that ended September 30, 2023, BKR’s revenue and adjusted operating income increased 23.7% and 42.3% year-over-year to $6.64 billion and $716 million, respectively. Moreover, its free cash flow stood at $592 million, up 42% from the year-ago quarter.

For the same quarter, adjusted net income attributable to BKR and adjusted earnings per share stood at $427 million and $0.42, up 61.7% and 61.5% from the prior-year quarter, respectively.

Street expects BKR’s revenue and EPS for the fiscal fourth quarter ending December 2023 to increase 17.6% and 26.1% year-over-year to $6.94 billion and $0.48, respectively. The company surpassed consensus revenue and EPS estimates in three of the trailing four quarters, which is impressive.

The stock has gained 25.1% over the past nine months to close the last trading session at $33.58. Over the past year, it has gained 15.6%.

BKR’s POWR Ratings reflect its positive prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has an A grade for Growth and a B for Momentum and Sentiment. Within the Energy – Oil & Gas industry, it is ranked #12 out of 85 stocks.

To see additional POWR Ratings for Value, Stability, and Quality for BKR, click here.

Sasol Limited (SSL)

Headquartered in Johannesburg, South Africa, SSL operates as an integrated chemical and energy company. Its segments include Advanced Materials; Base Chemicals; Essential Care Chemicals; and Performance Solutions.

On October 23,…