JP Morgan Says These 2 Strong Buy Energy Stocks Can Beat the Market – Yahoo Finance | Jewelry Dukan

We are nearing the end of the year and it is time to decide how to allocate the portfolio for a solid year-end return. In a recent note from JPMorgan that focused on the energy sector, 5-star analyst Arun Jayaram recommended that oil and gas producers are likely to outperform overall markets going forward.

Coming quickly to the bottom line, Jayaram notes, “We remain fans of natural gas’s longer-term history, which is being driven by growing global demand for low-cost US gas exports.”

With that in mind, we took a closer look at two energy stocks that received positive reviews from the JPM expert. In fact, Jayaram isn’t the only one praising these stocks. According to the TipRanks platform, they are ranked as strong buys by the rest of the analyst community.

Permian Resources (PR)

First up is Permian Resources, a Texas-based E&P operating in the Delaware Basin. Permian was formed earlier this year through the merger of equals between Centennial Resource Development and Colgate Energy. Permian Resources emerged from this merger as the largest pure-play E&P company operating in Delaware. Permian production assets include 180,000 net lease acres and 40,000 royalty acres; These stocks produced 137,000 barrels of oil equivalent per day, split evenly between oil and gas products.

Permian Resources’ assets are very valuable and the Company’s production drove strong sales and earnings in the recently reported 2Q22. Revenue was $472.7 million, more than doubling year over year from $232.6 million. Reported earnings of $193.1 million generated diluted earnings per share of 60 cents. This was a strong turnaround from 2Q21, which saw a quarterly EPS loss of 9 cents.

This company is currently on an 8 rig drilling program but has a detailed development plan for 2023 to start with 7 active rigs. Permian’s plans include improving operational efficiencies, and the company is targeting full-year 2023 free cash flow of $1.1 billion to $1.3 billion.

Jayaram, in his JPM report, points to Permian’s free cash flow and production growth as key points for investors, saying of the company, “We expect PR to deliver an attractive combination of significant cash returns coupled with differentiated volume growth while providing a… Reversal below trades peers on 2023 DACF and at a premium on FCF metrics. PR has declared an annual base dividend of $0.20 per share and will return at least 50% of post-dividend FCF to shareholders beginning in Q2’22.

“PR also ranks in the top quartile of our updated JPM Forced Ranker, which places the greatest weight on cash return and FCF generation, which we consider to be the most important metrics for investors. We estimate that PR will reach 10% of the market cap for shareholders in 2023 while also showing 10% growth in oil volume,” Jayaram added.

Jayaram quantifies his position and gives PR an Overweight (ie Buy) rating with a price target of $12, implying upside potential of ~56% over the next 12 months. (To see Jayaram’s track record, click here)

Overall, Permian receives a strong buy consensus rating from the street based on 8 analyst ratings, including 7 buys over 1 hold. Shares are selling for $7.66 and their average price target of $10.86 suggests a 35% upside for a year. (See PR Stock Forecast on TipRanks)

EOG resources (EOG)

The second stock we’ll be looking at, EOG, is one of the largest E&Ps in the North American hydrocarbon scene. The company has a market capitalization in excess of $71 billion and operates in some of the continent’s richest oil and gas regions. EOG has manufacturing operations in Texas, Louisiana, Oklahoma and New Mexico in such well-known areas as Eagle Ford, Permian, Anadarko and Barnett. The Company also has operations in the DJ Basin of Colorado, the Powder River Basin of Wyoming, and the Williston Basin on the North Dakota-Montana border. EOG even has operations in the Caribbean, with operations in the offshore Columbus Basin near the island of Trinidad.

All of this has propelled EOG’s earnings to record levels. The company reported a total of $7.4 billion in revenue for Q2 22, the most recent report, after quarterly production of 920.7 MBoed. Adjusted net income for the second quarter was $1.6 billion with adjusted earnings per share of $2.74. On its balance sheet, EOG reported a little over $5 billion in total debt and approximately $3 billion in cash and cash equivalents.

EOG posted 8 consecutive quarters of sequential revenue increases. Earnings were more volatile, but Q2 EPS rose 58% year over year.

Summarizing EOG for investors, Jayaram writes, “We continue to view EOG as a core long-term position in this space given its premium drilling strategy that stands poised to support differentiated returns on capital, assuming prices are mid-cycle or better. A key theme was the differentiated performance of E&Ps, which accelerate cash return to shareholders. Cash returns to shareholders have been more rewarded than deleveraging, favoring companies with strong balance sheets like EOG.”

The JPM analyst rates EOG as Overweight (i.e., Buy) and his price target, which he has set at $156, shows his confidence in a 28% upside move in the coming year. (To see Jayaram’s track record, click here)

Wall Street strongly agrees with Jayaram that the stock is a buy offer – the 14 available analyst ratings include 12 buy and 2 hold. Shares are trading at $121.42 and the average price target of $150.29 implies ~24% upside potential going forward. (See EOG Stock Prediction on TipRanks)

For great ideas on trading energy stocks at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that brings together all of TipRanks’ stock insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is for informational purposes only. It is very important that you do your own analysis before making any investment.

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