Oil and natural gas production in the U.S. is booming. Growth is particularly strong in the Permian Basin that straddles Texas and New Mexico. In fact, the International Energy Agency (IEA) is forecasting that U.S. oil producers will set output records between now and 2030. U.S crude oil production is forecast to rise by 2.1 million barrels per day (bpd) above 2023 levels by 2030.
West Texas Intermediate crude oil, the U.S. standard, is currently trading right around $81 per barrel. At the same time, the price of natural gas rebounded and is currently at a five-month high on forecasts of extreme heat across much of the U.S. this summer, raising demand for electricity to power air conditioners. The United Nations (U.N.) forecast that 2024 could be the hottest year on record.
This makes now a good time for investors to consider taking positions in stocks of crude oil and natural gas producers. Here is Wall Street favorites: three energy stocks with strong buy ratings for June 2024.
Targa Resources (TRGP)
Targa Resources (NYSE:TRGP) got a bullish write-up in Barron’s. The stock is also a favorite of analysts with a “strong buy” rating. All 14 analysts who cover the stock currently rate it a “buy.” There are no “hold” or “sell” ratings on the shares. The median price target on the energy company’s stock is 6% higher than where it currently trades. Analysts see Targa Resources as a great way to play the rebound in natural gas prices.
Some analysts are extremely bullish in their outlook for Targa stock. UBS, for example, raised its price target on TRGP stock to $147, implying 22% upside from current levels. JPMorgan Chase has gone so far as to name Targa stock a “top pick” in the energy sector with a $140 price target. Both UBS and JPMorgan like that Targa Resources is the largest natural-gas extractor in the Permian Basin of Texas.
TRGP stock has risen 40% on the year, with more gains expected.
Chevron (CVX)
Despite its underperformance, Chevron (NYSE:CVX) stock rates a “strong buy” from analysts. Among 15 analysts, a dozen rate the stock a “buy,” while three say it is a “hold.” There aren’t any “sell” ratings on CVX stock. Additionally, the median price target on Chevron’s stock is 22% higher than where the shares currently trade. Analysts don’t seem too troubled by the fact that Chevron’s share price has been flat over the last 12 months.
Instead, analysts say they like Chevron’s current valuation, with the stock trading at 14 times future earnings estimates and its quarterly dividend payment of $1.63 per share, giving it a hefty yield of 4.2%. Analysts also seem okay with Chevron’s $53 billion acquisition of rival Hess Corp. (NYSE:HES), which recently won the backing of shareholders and is working its way through regulatory approvals. Over the last five years, CVX stock increased 23%.
Shell (SHEL)
British oil giant Shell (NYSE:SHEL) is another energy giant whose stock has a “strong buy” rating. All four analysts covering the company rate it a “buy.” And the median price target on the shares is 30% higher than current levels. Analysts seem to agree that SHEL stock is undervalued at current levels. The company’s shares are trading at 14 times future earnings estimates and offer a quarterly distribution of 65 cents, giving it a yield of 3.75%.
In addition to the valuation and growth prospects, analysts like that Shell is rewarding shareholders. Earlier this year, the company hiked its quarterly dividend payment by 4% after reporting a strong profit for all of last year. Shell has also announced a new $3.5 billion stock buyback following the completion of its previous share repurchase program. Shell’s stock has increased 14% in the last 12 months, with more gains forecast.
On the date of publication, Joel Baglole 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.
