The Fed’s expected interest rate hikes going into the next year, the lasting effects of the pandemic, and the geopolitical instability due to the Russia-Ukraine war are expected to keep the markets in a bear grip. The S&P 500 declined 23.5% year-to-date, while the NASDAQ composite and Dow Jones fell more than 32% and 16% year-to-date, respectively.
JP Morgan CEO Jamie Dimon is braced for stocks to go down another 30% as a ‘soft landing’ has been deemed unlikely for the economy. He expects a recession in six to nine months, citing lingering macroeconomic and geopolitical headwinds.
However, amid this general bearishness in the broad market, few energy companies have been best placed to capitalize on opportunities presented by energy shortages caused by tensions with Russia and, more recently, perpetuated by OPEC+’s decision to cut oil production. This windfall has also helped them deliver solid returns to investors.
Fundamentally strong energy stocks APA Corporation (APA) and Unit Corporation (UNTC) have significantly outperformed the market this year and possess solid upside potential. So, it could be wise to invest in them.
APA Corporation (APA)
As an independent energy company, APA explores, develops, and produces natural gas, crude oil, and natural gas liquids (NGLs). The company operates in the United States, Egypt, and the offshore United Kingdom in the North Sea, Suriname, and other international locations.
On September 14, APA announced an increase in annual dividend from $0.50 per common share to $1.00 per common share, yielding 2.39% at the current price, compared to a 4-year average dividend yield of 2.88%. The next quarterly dividend of $0.25 per share will be paid out on November 22, 2022.
In August, APA announced an oil discovery offshore Suriname at Baja-1 in Block 53, drilled to a depth of 5,290 meters, and encountered 34 meters of net oil pay in a single interval within the Campanian. The company is currently progressing through the formalization of the election of the first one-year extension, for which all work commitments are complete.
For the second quarter of fiscal 2022 ended June 30, 2022, APA’s total revenues came in at $3.05 billion, up 71.3% year-over-year. During the same period, APA’s net income attributable to common stock increased 193% year-over-year to $926 million, while its net income per share increased 230.5% year-over-year to $2.71.
Analysts expect APA’s revenue and EPS for the current fiscal year (ending December 31, 2022) to increase 34.5% and 130.2% year-over-year to $10.66 billion and $8.98, respectively. The stock has gained 49.2% year-to-date to close the last trading session at $41.86.
APA’s excellent prospects have earned it an overall rating of A, which translates to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock also has grade A for Momentum and Quality and B for Growth and Value. APA is ranked #16 of 94 stocks in the B-rated Energy – Oil & Gas industry.
Click here to learn the additional POWR Ratings for Stability and Sentiment for APA.
Unit Corporation (UNTC)
UNTC explores, acquires, develops, and operates oil and natural gas properties in the United States. The company operates through its three broad segments: Oil and Natural Gas; Contract Drilling; and Mid-Stream.
UNTC’s cash balance is more than $115 million, augmented by proceeds received in July from the sale of its Gulf Coast oil and gas properties. With zero long-term debt, and an attractive inventory of upstream development opportunities, the company is poised to further create and return substantial value to its shareholders.
For the second quarter of the fiscal year 2022 ended June 30, UNTC’s total revenues increased marginally year-over-year to $134.55 million. Income from operations rose 79.8% from the prior-year quarter to $70.16 million. Net income attributable to UNTC came in at $80.09 million and $7.82 per share, compared to a net loss of $12.99 million and $1.09 per share in the prior-year quarter.
Shares of UNTC have gained 65.6% year-to-date to close the last trading session at $54.40.
UNTC’s overall POWR Rating of A, translating to Strong Buy, reflects its promising outlook. It also has a grade A for Value, Momentum, and Quality.
The stock is ranked #6 among 94 stocks in the Energy - Oil & Gas industry. For additional ratings on Growth, Stability, and Sentiment for UNTC, click here.
APA shares were unchanged in after-hours trading Friday. Year-to-date, APA has gained 50.03%, versus a -23.83% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
2 "Strong Buy" Stocks That Have Crushed the Market in 2022 StockNews.com
