The recent surge in oil prices has sparked renewed interest in energy stocks, particularly those thriving despite the ongoing volatility in the market. Investors looking to capitalize on this trend, could take a look at these three fundamentally sound companies like, Enterprise Products Partners L.P. (EPD), Energy Transfer LP (ET), and Suncor Energy Inc. (SU).
As tensions escalate in the Middle East, with Israeli troops moving into Lebanon and Iran launching missile attacks, concerns about oil supply disruptions are pushing prices higher. Recently, Brent crude prices rose close to $80 per barrel with U.S. West Texas Intermediate (WTI) following suit. Brent crude futures gained $1.09 to hit $79.14 a barrel, while WTI rose $1.15 to reach $75.53 per barrel.
Moreover, Iran’s strategic control over key shipping routes, such as the Strait of Hormuz, and its significant oil output, adds further uncertainty to global supply. Analysts warn that any escalation in the region could drive prices even closer to $100 per barrel, providing a significant tailwind for energy stocks.
Meanwhile, the International Energy Agency (IEA) also expects global gas demand to rise by more than 2.5% in 2024, with similar growth projected in 2025. Further, with Brent crude expected to average $82.80 per barrel in 2024 due to ongoing OPEC+ production cuts and supply concerns, the energy sector remains a promising area for investment.
With that in mind, let’s analyze the fundamental aspects of the featured stocks in detail:
Enterprise Products Partners L.P. (EPD)
EPD provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals, and refined products. It operates in four segments: NGL Pipelines & Services; Crude Oil Pipelines & Services; Natural Gas Pipelines & Services; and Petrochemical & Refined Products Services.
On October 2, the company declared a quarterly dividend of $0.525 per unit, payable to common unitholders on November 14, 2024. With 25 years of consecutive dividend growth, EPD pays an annual dividend of $2.10, which translates to a yield of 7.07% at the current share price. Its four-year average dividend yield is 7.60%. Moreover, its dividend payouts have increased at a CAGR of 4.6% over the past three years.
On August 21, EPD announced the acquisition of Piñon Midstream, LLC, a Black Bay Energy Capital portfolio company, in a debt-free transaction valued at $950 million in cash. Management views this acquisition as a strategic move to expand its natural gas processing footprint in the eastern flank of the Delaware Basin. Moreover, the deal is expected to add $0.03 per unit to distributable cash flow in 2025, excluding potential synergies.
For the second quarter of 2024, which ended on June 30, EPD’s total revenues increased 26.6% year-over-year to $13.48 billion. The company’s operating income stood at $1.77 billion, up 11.8% year-over-year, while its attributable net income to common unitholders amounted to $1.41 billion, representing an increase of 12.1% from the last year. Also, its earnings per common unit for the quarter increased 12.3% year-over-year to $0.64.
The consensus revenue estimate of $14.04 billion for the fiscal third quarter (ended September 2024) represents a 17% increase year-over-year. The consensus EPS estimate of $0.67 for the to-be-reported quarter indicates a 9.9% improvement year-over-year. The company has an impressive surprise history; it surpassed the consensus revenue estimates in three of the trailing four quarters.
Over the past nine months, the stock has surged 10.9%, closing the last trading session at $29.70.
EPD’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
EPD has a B grade for Value, Momentum, and Stability. It is ranked #10 out of 23 stocks in the A-rated MLPs - Oil & Gas industry. Click here to see the additional ratings for EPD (Growth, Sentiment, and Quality).
Energy Transfer LP (ET)
ET provides energy-related services. It owns and operates a natural gas transportation pipeline, natural gas storage facilities, and nearly 20,090 miles of interstate natural gas pipeline. The company also sells natural gas to electric utilities, independent power plants, local distribution and other marketing companies, and industrial end-users.
On August 9, ET paid its unitholders a dividend of $0.32 per common unit for the second quarter, reflecting an increase of 3.2% year-over-year. The company pays an annual distribution of $1.28 per unit, which translates to a yield of 7.85% on the current share price. Its four-year average dividend yield is 8.63%.
In July, the company acquired WTG Midstream Holdings LLC for $2.28 billion in cash and 50.8 million newly issued ET common units. The acquisition expands ET’s Midland Basin network with 6,000 miles of gas-gathering pipelines, eight gas processing plants with a capacity of 1.3 Bcf/d, and two additional plants under construction.
Moreover, the deal is expected to boost NGL and natural gas volumes, generating additional revenue from gathering, processing, and transportation fees. ET anticipates that the WTG assets will increase Distributable Cash Flow by $0.04 per unit in 2025, rising to $0.07 by 2027.
ET’s revenues increased 13.1% year-over-year to $20.73 billion during the second quarter that ended June 30, 2024. Its operating income grew 25.2% from the year-ago value to $2.29 billion. Net income attributable to partners came in at $1.31 billion and $0.35 per common unit, up 44.2% and 40% from the prior year’s quarter, respectively.
Furthermore, the company’s adjusted EBITDA increased 20.4% year-over-year to $3.76 billion. And its adjusted distributable cash flow rose 31.2% from the year-ago value to $2.04 billion.
Analysts expect ET’s revenue for the third quarter (ended September 2024) to increase 5.4% year-over-year to $21.87 billion. Its EPS for the same quarter is expected to improve 130.5% from the prior year to $0.35. For the fiscal year 2024, the company’s revenue and EPS are expected to register a year-over-year growth of 11.7% and 30.9%, respectively.
Shares of ET have surged 22.2% over the past year to close the last trading session at $16.30.
ET’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Growth and a B for Value, Momentum, and Stability. ET is ranked #2 out of 78 stocks in the Energy - Oil & Gas industry. To see additional POWR Ratings of ET for Sentiment and Quality, click here.
Suncor Energy Inc. (SU)
Headquartered in Calgary, Canada, SU operates as an integrated energy company through segments: Oil Sands, Exploration and Production, Refining and Marketing, and Corporate and Eliminations. It primarily focuses on developing petroleum resource basins in Canada’s Athabasca oil sands and crude oil production for Canadian and international markets.
On September 25, the company paid its shareholders a quarterly dividend of $0.545 per share. SU’s four-year average dividend yield is 4.12%, and its current annual dividend of $1.61 translates to a 4.02% yield. Its dividend payout has grown at an impressive CAGR of 33.9% over the past three years.
SU’s adjusted operating earnings in the second quarter ended June 30, 2024, increased 29.8% year-over-year to $1.63 billion, while its net earnings amounted to $1.57 billion or $1.22 per share. Its free fund flows grew 29.6% from the year-ago value to $1.35 billion. Also, its adjusted funds from operations stood at $3.40 billion, up 27.9% from the prior-year period.
Street expects SU’s EPS for the fiscal year ending December 2024 to increase 2% year-over-year to $3.85. Its revenue for the current year is projected to grow marginally by 1.6% from the year-ago value to $38.18 billion. In addition, it topped the EPS estimates in each of the trailing four quarters, which is impressive.
SU’s shares have gained 18.6% over the past nine months and 24.8% year-to-date to close the last trading session at $39.97.
It’s no surprise that SU has an overall rating of B, which equates to Buy in our proprietary rating system. It has an A grade for Quality and a B for Momentum and Stability. Out of 78 stocks in the Energy - Oil & Gas industry, it is ranked #11.
In addition to the POWR Ratings we’ve stated above, we also have SU’s ratings for Growth, Value, and Sentiment. Get all SU ratings here.
What To Do Next?
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EPD shares were trading at $29.59 per share on Monday afternoon, down $0.11 (-0.37%). Year-to-date, EPD has gained 18.61%, versus a 20.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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