Crude futures (CLF24) are declining today to revisit their 2023 second-half lows around $72 per barrel, right around a key technical support level - and near the price zone where the Biden administration has said it would be a buyer of oil. Many energy stocks are also trading lower to start the week, including shares of Scorpio Tankers (STNG).
Longer term, the oil and gas shipping company - valued at right around $3 billion by market cap - is up just 1.8% over the last 52 weeks, and down about 14% from February's 52-week high north of $64.
However, with analysts predicting major upside for STNG over the next year - along with the company's generous dividend policy - is now a good time to buy shares on the dip? Let's take a closer look at Wall Street's forecast for this energy dividend stock.
Scorpio Beats on Earnings, Pays Down Debt
Scorpio Tankers, founded in 2009 by Emanuele A. Lauro and headquartered in Monaco, is a key player in the marine transportation of refined petroleum products and crude oil. The company's fleet - including 14 Handymax tankers, 39 LR2 tankers, and 59 MR tankers - transports various refinery outputs, including gasoline, diesel, fuel, and naphtha.
In Scorpio's Q3 earnings results, announced Nov. 9, the company beat Wall Street's expectations on both the top and bottom lines, even as EPS and revenue both fell from the year-ago period. Adjusted net income for the period was $99.2 million, or $1.91 per diluted share, which comfortably topped estimates. Likewise, revenue declined to $291.18 million, which was about $11 million stronger than expected.
The company also strengthened its balance sheet, as total liabilities decreased by 26% to $1.86 billion. Scorpio continued with its vessel buyback activities during the quarter as it works to pay down debt, which it has now reduced by about $1.3 billion since late December 2021.
Is STNG a Good Dividend Stock?
In the Q3 earnings presentation, management noted that they prefer share buybacks to dividends when trading at a “significant discount to NAV.” To that end, Scorpio has bought back 10 million shares YTD worth $490 million.
The company also hiked its quarterly dividend to $0.35 per share, and now offers a generous forward yield of 2.51%. That's backed by a low payout ratio of 6.7%, indicating that Scorpio has plenty of room to keep investing in its own growth and allowing for future dividend increases, too.
What Do Analysts Expect for Scorpio Tankers Stock?
Wall Street's expected upside for Scorpio Tankers stock over the next 12 months, compared to the stock's current trading price, is considerable. The mean price target is $73.88, representing a premium of 34%.
The consensus rating among the 7 analysts following STNG is a “Strong Buy." Out of this group, only one analyst breaks from the pack with a “Hold” rating.
Should You Buy Energy Stock STNG for 2024 Upside?
The energy space remains volatile as we head toward the close of 2024 - and as the fate of the Fed's monetary policy hangs in the balance, it's not easy to predict where oil prices might be headed over the next year.
That said, STNG stands out within the energy space for its strong foothold in petroleum transport, along with management's commitment to paying down debt and rewarding shareholders. For investors looking for oil stocks that combine growth potential with income, Scorpio stock is one to consider at current levels.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
