Despite volatility in the energy market due to geopolitical turmoil and macroeconomic headwinds, the energy sector has significantly outperformed the rest of the market this year.
Investors’ interest in energy stocks is evident from the Energy Select Sector SPDR Fund’s (XLE) 56.9% year-to-date returns, compared to the SPDR S&P 500 ETF Trust’s (SPY) 19.4% decline.
Moreover, analysts remain bullish due to the implementation of the European Union’s price cap on Russian crude and a harsh cold winter in the northern hemisphere, which could increase energy bills.
S&P’s Dan Yergin expects the base case for oil prices to stand at $90 per barrel in 2023, while there remains a chance it could go as high as $121 per barrel as China completely reopens and further strains the underinvested oil and gas sector.
Against this backdrop, the fundamentally sound energy stock Berry Corporation (BRY) could be a solid buy. However, considering its bleak fundamentals, Camber Energy, Inc. (CEI) might be best to liquidate now.
Stock to Buy:
Berry Corporation (BRY)
BRY is an independent upstream energy company that develops and produces conventional oil reserves in the western United States. It operates in two segments, Development and Production; and Well Servicing and Abandonment.
On November 2, the company’s board of directors declared a dividend of $0.47 per share on its outstanding common stock. The variable and fixed portion of the dividends was payable to shareholders on November 28. This reflects on BRY’s shareholder return ability.
BRY’s total revenues and other came in at $376.45 million for the third quarter that ended September 30, 2022, up 162.5% year-over-year. Its adjusted net income came in at $45.52 million, up 294.5% year-over-year. Also, its earnings per share on adjusted net income came in at $0.55, up 292.9% year-over-year.
BRY’s revenue is expected to increase 37.6% year-over-year to $749.75 million in the fiscal year ending December 2022. Its EPS is expected to grow 675.2% year-over-year to $1.94 in the same period. BRY has topped Street EPS and revenue estimates in three out of the trailing four quarters, which is impressive.
BRY’s shares have gained 11.8% over the past three months to close the last trading session at $8.05. It has also gained 7.9% over the past six months.
BRY’s strong fundamentals are reflected in its POWR Ratings. It has an overall A rating, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Value and Momentum and a B for Growth and Sentiment. It is ranked #3 of 93 in the B-rated Energy - Oil & Gas industry.
Click here to see BRY’s additional POWR Ratings for Stability and Quality.
Stock to Avoid:
Camber Energy, Inc. (CEI)
CEI is an independent oil and natural gas company, which acquires, develops, and sells natural gas, crude oil, and natural gas liquids (NGL) in Louisiana, Missouri, and Texas.
Recently, the company’s board of directors approved a 1-for-50 reverse stock split of its issued and outstanding shares of common stock, a par value of $0.001 per share, accompanied by a corresponding decrease in the authorized shares of common stock.
For the quarter ended September 30, CEI’s loss from operations widened 32.8% year-over-year to $1.22 million. During the same period, the net loss attributable to common shareholders came in at $23.28 million and $0.05 per share. The company’s total current assets stood at $2.60 million as of September 30, 2022, compared to $5.94 million as of December 31, 2021.
In terms of its trailing-12-month Price/Sales, CEI is currently trading at 29.02x, substantially higher than the industry average of 1.29x. Its trailing-12-month EV/Sales multiple of 121.78 compares with the industry average of 1.92.
The stock has declined 86.6% over the past six months and 56.4% over the past month to close its last trading session at $2.40.
It’s no surprise that the stock has an overall rating of F, which translates to a Strong Sell in our proprietary rating system.
CEI is graded an F for Value and Stability and a D for Sentiment and Quality. In the same industry, it is ranked #91.
To see the additional POWR Ratings for CEI (Growth and Momentum), click here.
BRY shares were trading at $8.12 per share on Tuesday afternoon, up $0.07 (+0.87%). Year-to-date, BRY has gained 11.36%, versus a -18.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
1 Energy Stock to Buy in 2023 and 1 to Liquidate StockNews.com
