With a surge in demand driven by the global economic recovery, energy prices in the S&P Goldman Sachs Commodity Index (GSCI) ended 2021 59% higher than the first trading day of the year. According to the Winter Fuels Outlook 2021 from the U.S. Energy Information Administration, nearly half of households that heat with natural gas are projected to spend 30% more than they did last winter on average.
While governments worldwide have undertaken various steps to transition to a renewable-energy-driven sustainable future, crude oil and natural gas companies continue to witness increasing demand. Furthermore, according to the International Energy Agency, the coal demand could reach an all-time high in 2022 due to the rebound in the global economy.
Given this backdrop, we think it could be worth adding shares of energy stocks Hess Corporation (HES) and Coterra Energy Inc. (CTRA) to one’s watchlist because Wall Street analysts expect these stocks to rally by more than 40% in price in the near term.
Hess Corporation (HES)
Incorporated in 1920, New York City-based HES is a global independent energy company that explores for crude oil and natural gas. The company operates through two segments, Exploration and Production; and Marketing and Refining. HES’ segments offer crude oil, NGLs, and natural gas. As of Dec. 31, 2020, the company had total proved reserves of 1,077 million barrels of oil equivalent.
For the third quarter, ended Sept. 30, 2021, HES’ net income came in at $115 million, compared to a $243 million net loss in the prior-year quarter. The company’s EPS amounted to $0.37, compared to an$0.8 loss per share in the third quarter of 2020.
Analysts expect HES’ revenue to increase 16.8% year-over-year to $7.73 billion in its fiscal 2022. The company has an impressive earnings surprise history; it beat the consensus EPS in each of the trailing four quarters. Its EPS is estimated to grow 168.6% in fiscal 2021 and 132.8% in fiscal 2022. HES has gained 45.5% in price over the past year.
Closing the last trading session at $76.79, the $107.58 average analyst price target represents a 40.1% potential upside.
Coterra Energy Inc. (CTRA)
CTRA is a Houston, Tex.-based diversified energy company that explores for, exploits, develops, produces, and markets oil and gas properties in the United States. The company’s portfolio includes Permian Basin, Marcellus Shale, and Anadarko Basin. CTRA sells its natural gas to industrial customers, local distribution companies, gas marketers, and power generation facilities.
During the third quarter, ended Sept.30, 2021, CTRA’s operating revenues increased 51.3% year-over-year to $440.4 million. The company’s income from operations came in at $95.84 million, compared to a $7.53 million loss from operations in the prior-year quarter. Its net income amounted to $62.71 million, compared to a $14.96 million net loss in the third quarter of 2020.
CTRA’s revenue for fiscal 2022 is expected to increase 99.8% year-over-year to $6.6 billion. The company’s EPS is estimated to grow 438.9% in fiscal 2021 and 23% in fiscal 2022. Furthermore, CTRA has surged 20.2% in price over the past year.
The consensus price target of $19.57 represents a 43.7% potential gain from CTRA’s last closing price of $28.13.
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HES shares were trading at $81.16 per share on Tuesday afternoon, up $4.37 (+5.69%). Year-to-date, HES has gained 9.63%, versus a 0.46% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research. More...
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