The energy sector expects growth in 2024, driven by restricted oil supply, geopolitical tensions, and rising investments in international production, favoring energy equipment and services companies. Thus, investors could consider investing in top energy stocks CVR Energy, Inc. (CVI), North American Construction Group Ltd. (NOA), and Adams Resources & Energy, Inc. (AE).
While oil prices have been going down lately, geopolitical uncertainties, including tensions in the Middle East and a Ukrainian drone strike on Novatek's export terminal, have limited losses and contributed to a 2% rise in crude prices last Monday. Geopolitical pressures are preventing a market bottom-out, according to experts, as demonstrated by ongoing uncertainties in various regions.
The IEA has forecast that global oil demand will rise by 1.2 million barrels per day this year compared to 2023. Also, OPEC expects oil demand to increase by 2.25 bpd this year and 1.8 million bpd next year. Moreover, the EIA foresees a continuation of economic growth supporting a modest 1.3% increase in the United States average diesel consumption in 2024.
Besides, the global Energy as a Service (EaaS) market is expanding, fueled by a focus on both renewable and non-renewable energy, government support, and the flexibility it offers in pricing and ownership, enabling customized energy projects with integrated storage solutions. The global EaaS market is expected to grow at a CAGR of 8.9% by 2028.
Further, the global AI in the oil and gas market is experiencing growth driven by increased efficiency, cost reduction, and enhanced safety through advanced algorithms. The industry benefits from AI applications in optimizing exploration, refining processes, and predicting hydrocarbon reserves.
The global AI in the oil and gas market is estimated to expand at a CAGR of 14% to reach $18.94 billion by 2032.
Considering these conducive trends, let’s examine the fundamentals of the three energy stock picks.
CVR Energy, Inc. (CVI)
CVI engages in petroleum refining and nitrogen fertilizer manufacturing in the United States, operating refineries in Kansas and Oklahoma. The Petroleum segment refines and markets products, while the Nitrogen Fertilizer segment produces nitrogen fertilizers in North America.
On November 20, 2023, CVI paid a quarterly cash dividend of $0.50 per share. The company pays $2 annually, which translates to a yield of 6.60% on the prevailing price level. Its four-year average dividend yield is 13.73%. The company has raised its dividend payouts at a CAGR of 23.1% over the past three years.
In the third quarter, which ended September 30, 2023, CVI reported net sales of $2.52 billion. The company generated a net income of $354 million, up 342.5% from the previous-year quarter. Moreover, its adjusted EPS and EBITDA stood at $1.89 and $313 million, respectively.
Street expects CVI’s revenue and EPS to be $2.22 billion and $0.43, respectively, for the fourth quarter ended December 2023. The company surpassed the revenue and EPS estimates in three of the trailing four quarters, which is impressive.
The stock has gained 21.1% over the past nine months to close the last trading session at $30.40. It gained marginally intraday.
CVI’s POWR Ratings reflect its sound prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CVI has an A grade for Quality and a B for Value. Within the Energy - Oil & Gas industry, it is ranked #5 out of 82 stocks.
In addition to the POWR Ratings stated above, one can access CVI’s additional Growth, Momentum, Stability, and Sentiment ratings here.
North American Construction Group Ltd. (NOA)
Based in Acheson, Canada, NOA operates in Canada, the United States, and Australia, offering equipment maintenance, mining, and heavy construction services. The company's diverse services include constructability reviews, project management, and contract mining, backed by a substantial fleet of 637 heavy equipment units.
On January 5, 2024, NOA paid a regular quarterly dividend of $0.10 per common share. The company pays $0.30 annually, which translates to a yield of 1.28% on the prevailing price level. Its four-year average dividend yield is 1.37%.
The company has raised its dividend payouts at a CAGR of 34.8% and 36.8% over the past three and five years, respectively. Moreover, the company boasts a seven-year record for consecutive years of dividend growth.
During the third quarter, which ended September 30, 2023, NOA’s revenue rose 1.8% year-over-year to C$194.74 million ($144.54 million). The company's gross profit increased 7.1% from the previous-year quarter to C$26.31 million ($19.53 million). It reported adjusted net earnings and EBITDA of C$14.30 million ($10.61 million) and C$59.37 million ($44.06 million), respectively.
For the fiscal year 2024, the company expects its adjusted EBITDA to range between C$295 million ($218.95 million) and C$310 million ($230.08 million) and EPS to be between C$2.80 and C$3. Moreover, its free cash flow for the same fiscal year is expected to be in the range of C$90 million ($66.80 million) to C$110 million ($81.64 million).
NOA’s revenue and EPS are expected to grow 43.6% and 60.7% year-over-year to $1.01 billion and $3.37, respectively, for the fiscal year ending December 2024. The company surpassed the revenue estimates in three of the trailing four quarters.
NOA’s shares have gained 58.4% over the past year to close the last trading session at $23.38.
NOA’s POWR Ratings reflect its robust prospects. The stock has an overall B grade, which translates to Buy in our proprietary rating system.
NOA has a B grade for Momentum and Sentiment. Within the Energy - Services industry, it is ranked #6 among 52 stocks.
To see NOA’s additional POWR Ratings for Growth, Value, Stability, and Quality, click here.
Adams Resources & Energy, Inc. (AE)
AE operates in the United States, engaging in the marketing, transportation, and storage of crude oil and related products through segments like Crude Oil Marketing and Transportation. The company serves customers across several states.
On December 15, 2023, AE paid a quarterly cash dividend of $0.24 per common share. The company pays $0.96 annually, which translates to a yield of 4.03% on the prevailing price level, higher than its four-year average dividend yield of 3.24%.
The company has raised its dividend payouts at a CAGR of 1.8% over the past five years. Moreover, the company boasts a 15-year record for consecutive years of dividend payments.
In the third quarter, which ended September 30, 2023, AE generated revenue of $760.61 million. The company's total costs and expenses decreased 11% year-over-year to $756.69 million. Its adjusted free cash flow amounted to $4.75 million. As of September 30, 2023, its total assets amounted to $410.60 million, compared to its total assets of $384.16 million as of December 31, 2022.
Analysts expect AE’s revenue to be $662.93 million for the fourth quarter that ended December 2023. Its EPS for the same quarter is expected to improve 88.9% year-over-year.
The stock declined marginally intraday to close the last trading session at $23.80.
AE’s optimistic fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
AE has a B grade for Growth and Value. Within the Energy - Oil & Gas industry, it is ranked #3.
Click here for AE’s additional Momentum, Stability, Sentiment, and Quality rating.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
CVI shares were trading at $30.66 per share on Wednesday afternoon, up $0.26 (+0.86%). Year-to-date, CVI has gained 1.19%, versus a 2.75% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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