Macroeconomic volatilities and geopolitical crises hampered the overall economy’s performance last year. However, the performance of the energy sector has been significantly well. Over the past year, the Energy Select Sector SPDR Fund (XLE) has gained 44.9%, whereas the SPDR S&P 500 ETF Trust (SPY) declined 9.6% over the same period.
Furthermore, in its monthly report, the International Energy Agency said that the lifting of COVID-19 restrictions in China could propel global oil demand to its highest on record, surging from its current 100 million b/d to almost 104 million b/d by the end of 2023.
On top of it, hedge fund manager Pierre Andurand anticipates the full reopening of the Chinese economy could send oil prices past $140 per barrel this year.
Given the promising growth prospects of the industry, it might be wise to add fundamentally strong energy stocks APA Corporation (APA) and CVR Energy, Inc. (CVI) to your portfolio before they potentially explode.
APA Corporation (APA)
APA explores, develops, and produces crude oil and gas properties. The company has operations in the United States, Egypt, and the United Kingdom and carries out exploration activities offshore Suriname.
On December 13, 2022, APA’s board of directors declared a regular dividend on the company's common shares at a rate of 25 cents per share on its common stock, payable to shareholders on February 22, 2023. This reflects its shareholder return ability.
On November 9, APA announced a multi-year partnership with the Clean Cooking Alliance (CCA) to improve health, reduce climate and environmental impacts, and improve overall livelihoods. This reflects the company’s commitment to sustainability.
In the fiscal third quarter that ended September 30, APA’s revenues and other increased 74% year-over-year to $2.87 billion. Adjusted earnings after tax and adjusted EPS came in at $651 million and $1.97, up 75% and 101% from their year-ago values, respectively.
Analysts expect revenue and EPS for the fiscal year that ended December 2022 to come in at $10.57 billion and $8, reflecting 33.3% and 105.2% year-over-year improvements, respectively. Also, it surpassed the consensus revenue estimates in all four trailing quarters, which is impressive.
APA’s stock has gained 39.1% over the past six months. It has gained 4.4% over the past three months to close its last trading session at $45.09.
APA’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
APA has an A grade for Quality and Momentum. It is ranked #25 in the B-rated 92-stock Energy – Oil & Gas industry.
Click here to see the additional POWR Ratings for Growth, Value, Stability, and Sentiment for APA.
CVR Energy, Inc. (CVI)
CVI operates as a diversified holding company that primarily engages in petroleum refining and nitrogen fertilizer manufacturing. The company operates through its two broad segments of Petroleum and Nitrogen Fertilizer.
On November 21, 2022, CVI’s board of directors announced that it authorized CVI’s management to explore a potential spin-off of its interests in its nitrogen fertilizer business. The potential spin-off is expected to create a new public company to hold such interests and separate the nitrogen fertilizer business from CVI’s refining and renewables businesses.
In October, CVI announced a third-quarter 2022 dividend of 40 cents per share. In addition, the company announced a special dividend of $1.00 per share, which brought its year-to-date declared dividends to $4.80 per share. The quarterly and special dividends were paid to stockholders on November 21, 2022. This reflects its cash generation ability.
CVI’s net sales increased 43.3% year-over-year to $2.70 billion in the fiscal third quarter that ended September 30, 2022. The company’s adjusted EBITDA improved 216.2% from the prior-year period to $313 million.
Net income attributable to CVI stockholders came in at $93 million, an increase of 10.7% year-over-year, while its adjusted earnings per share stood at $1.90, compared to an adjusted loss per share of $0.24 in the prior-year quarter.
Street EPS estimate for the fiscal first quarter ending March 2023 of $0.62 indicates a substantial year-over-year increase. Likewise, Street estimates revenue to come in at $2.12 billion for the same quarter. Moreover, it surpassed consensus revenue estimates in all the trailing four quarters.
The stock has gained 3.9% over the past three months and 9% over the past month to close the last trading session at $32.72.
CVI’s strong fundamentals are reflected in its POWR Ratings. CVI's overall B rating equates to Buy in our proprietary rating system.
CVI has an A grade for Momentum and a B for Quality and Growth. It is ranked #14 in the same industry.
To see the additional POWR Ratings for Value, Stability, and Sentiment for CVI, click here.
APA shares were trading at $45.72 per share on Monday morning, up $0.63 (+1.40%). Year-to-date, APA has declined -1.51%, versus a 3.55% 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.
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