And BP has a rock-bottom price-to-earnings ratio, which makes it a real bargain right now. The world is slowly moving away from fossil fuels in favor of green alternative, but that transition will take decades. The world’s largest oil-exporting nations include members of OPEC (Organization of the Petroleum Exporting Countries), a cartel that works to coordinate members’ oil policies. It can withhold supply to push prices higher or increase its output to drive them lower. OPEC has wielded its power over the years, causing massive fluctuations in oil prices.
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Some recent dealmaking, a diversified business and comparatively low cost of supply has the Street stampeding into the bull camp for Diamondback Energy (FANG, $77.67). Those moves and others have made Devon one of the most popular names in the industry with analysts. Oil stocks have been pretty slick in 2021, rising sharply in anticipation of a massive recovery in global economic activity as the COVID-19 pandemic fades. He spent five years as a staff reporter at The Wall Street Journal, and has https://investmentsanalysis.info/ also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia. In July, Suncor Energy fired then-CEO Mark Little, who was replaced on an interim basis by the Executive Vice President for Downstream Operations Kris Smith. Mark Little’s departure came after Elliott Management raised concerns about safety and operational problems at Suncor, noting that there have been 12 fatalities at the company’s oil sites since 2014.
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Given the growth of renewables, many investors are choosing to avoid oil stocks entirely. However, ExxonMobil is making investments in lower-carbon fuel sources, including carbon capture and storage, as well as biofuels, which may enable it to continue supplying the economy with fuel for years to come. TotalEnergies isn’t alone; peers Royal Dutch Shell (RDS.B) and BP (BP 1.36%) are also using their oil profits to fund clean energy investments. However, of this trio, only TotalEnergies is going down this road without a dividend cut.
The Best Oil Stocks to Buy for 2023: ExxonMobil (XOM)
- Three of the TSX’s best buy-and-hold stocks are proven wealth-builders if you want to get richer.
- The company has changed a great deal over the last few decades, however, through a series of mergers and corporate restructurings.
- Though perhaps not the first name you think of given its overseas operations and relatively modest market cap, Eni is nevertheless poised to deliver high octane results for investors.
- This specialized business involves more technical expertise, more risk and fundamentally more up-front costs than land-based extraction.
“This provides the company with a competitive advantage, especially with oil prices above $50 per barrel.” Meanwhile, the company’s balance sheet is among the strongest in the industry with a debt-to-equity ratio of just 0.2 times. Historically, that financial strength has allowed Exxon to take on debt during industry downturns so it can continue to invest in its business and pay a growing dividend. Moreover, because of the diversification, these companies are something of a one-stop shop for energy exposure. That simplifies the investment process, since you don’t need to add a driller, a refiner, and a pipeline company. Although more stocks can increase diversification, you should avoid spreading your investment time and energy over so many individual stocks that you have a hard time tracking your investments.
Integrated oil companies
And even after a hot start to 2021, shares still look compellingly valued. The best oil stocks to pursue, for now, are primarily those that have positioned themselves to withstand even more headwinds in the future. The company announced Q3 net income of $832 million, or $1.24 per share, up 168% from $310 million, or 39 cents a share, a year earlier.
Such criticism hasn’t gone away, and Microsoft fell 1.1% despite reporting profit and revenue for the latest quarter that edged past analysts’ expectations. Growth in its Azure cloud-computing business fell a bit shy of analysts’ forecasts. That followed earlier profit reports from Tesla and Alphabet that investors found underwhelming, which raised concerns that other Magnificent Seven stocks could also fail to impress.
However, investors should be encouraged that in addition to strong financials right now there are also impressive forecasts for FANG in 2024, including nice revenue and earnings growth. Even though reductions in energy prices will likely pinch fiscal 2023 revenues, several analysts recently boosted target prices for Suncor Energy. They’ve also raised Best oil stock earnings per share estimates for upcoming quarters. If fulfilled, that would not just be a sign of consistency in operations. It would also be a sign that Suncor will likely build on its impressive track record of consistent and growing dividends. One of the largest oil companies on the planet, ExxonMobil is a fully integrated supermajor.
Of the 33 analysts covering FANG tracked by S&P Global Market Intelligence, 20 rate it at Strong Buy, seven say Buy and six have it at Hold. Their average target price of $94.19 gives this oil stock implied upside of about 21% over the next year or so. As investors in oil stocks know all too well, the industry underwent an intense period of consolidation amid the pandemic-driven rout in energy prices. Oil stocks, which also declined over the summer, are now trading sideways or trending lower along with oil prices. This presents a potential buying opportunity for investors who are looking to ride oil stocks higher as we head into the New Year.
Brent crude and West Texas Intermediate fell about 1% to their lowest prices since January. Oil stocks as a group have been market laggards since the S&P 500 bottomed out late last year. If there’s any solace to be found, it’s that analysts say rising demand and lower inventories should help the top-rated oil stocks outperform in the second half of 2024 and beyond.
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