Energy stocks are heating up, and the sector is poised for a sizzling end to the first quarter. As a leading sector exchange-traded fund (ETF), the Fidelity MSCI Energy Index ETF (NYSEARCA:FENY) has already jumped 8.0% year-to-date (YTD), outpacing the S&P 500’s 7.2% gain—tight supplies, geopolitical risks and rising global energy demand fuel the sector’s outperformance. Oil prices are expected to remain elevated in the months ahead, setting the stage for strong profitability and stock gains.
Meanwhile, energy transition also drives long-term growth as companies invest in renewables, hydrogen and carbon capture. Therefore, today’s article introduces three energy companies that leverage key industry trends and boast strong fundamentals to power consistent returns. These energy stocks deserve your attention if you want to power up your portfolio.
Chevron (CVX)
Global energy giant Chevron (NYSE:CVX) is the first pick among today’s energy stocks. The company’s scale, low-cost assets and shareholder-friendly policies make it a compelling pick for many long-term investors. Management is also investing heavily in renewable fuels, hydrogen and carbon capture, positioning it to thrive in the energy transition.
Chevron’s latest earnings showcase its strengths. The company reported fourth-quarter adjusted earnings per share (EPS) of $3.45, beating estimates. While revenue declined 16.5% year-over-year (YoY) to $47.18 billion, Chevron still returned a record $26.3 billion to shareholders in 2023 through dividends and share buybacks. Finally, the board raised its quarterly dividend by 8% to $1.63 per share, marking close to four decades of increases.
Looking ahead, production is expected to grow 4-7% in 2024 as Chevron expands in the Permian Basin and integrates its $53 billion acquisition of Hess (NYSE:HES). Elsewhere, Chevron announced its first solar-to-hydrogen production project in California’s Central Valley, showcasing a commitment to renewable energy.
So far in 2024, CVX stock has advanced 4.2% and the dividend yield is a generous 4.24%. Meanwhile, the stock still looks reasonably valued at 11.6 times forward earnings and 1.4 times trailing sales. Analysts see more upside ahead, with a consensus price target of $180 per share, implying 15% returns.
Enbridge (ENB)
Our second pick among leading energy stocks is Enbridge (NYSE:ENB), offering a unique twist on the traditional oil and gas play. This Canadian giant focuses on the transportation and distribution of energy resources through an extensive network of pipelines. Unlike companies reliant on volatile commodity prices, ENB generates revenue through long-term contracts, providing a more stable income stream.
Enbridge announced the fourth quarter and full year fiscal 2023 results in early February. Adjusted EPS was 64 Canadian cents for the fourth quarter, compared to 63 Canadian cents for the year-ago period. Meanwhile, management reaffirmed its outlook for 2024. The board also increased the quarterly dividend by 3.1%. Enbridge is well-positioned to grow its cash flows into the future, while it has a $25 billion secured growth backlog comprised of over 20 executable projects.
Yet, ENB stock has stayed flat YTD, while the dividend yield is a hefty 7.5%. The shares change hands at a forward price-to-earnings ratio of 9.9x, at a discount to midstream peers like Enterprise Products Partners (NYSE:EPD) with 11.2 times forward earnings. Finally, the 12-month median price forecast for ENB stock is $39.13, offering an upside potential of over 9%.
Equinor (EQNR)
Norway-based Equinor (NYSE:EQNR) is our last pick among the energy stocks for today’s article. As Europe works to reduce its reliance on Russian energy imports, Equinor’s oil and gas production provides a key secure supply source. The company also invests heavily in offshore wind, solar and other low-carbon solutions to drive long-term growth.
Equinor’s latest earnings showed revenues at $29.05 billion compared to $34.32 billion for the year-ago quarter, mainly due to lower commodity prices. Nonetheless, the board raised the dividend to 35 cents per share. In January, Equinor took a $200 million loss related to restructuring its offshore wind partnership with BP (NYSE:BP) in New York state. This writedown has been a headwind for Equinor’s stock.
So far in 2024, EQNR stock has declined 17%, while the shares trade at just 8.8 times forward earnings. Meanwhile, analysts’ 12-month forecast stands at $29.39, with a return potential of over 11%. With its leverage to Europe’s energy security needs, suggesting a focus on renewable investments and a reasonable valuation, Equinor stock deserves your attention as a viable energy pick.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
