Despite geopolitical turmoil and volatile market conditions, the energy sector posted an impressive performance last year. The Energy Select Sector SPDR Fund (XLE) has gained 43.7% over the past year, compared to the SPDR S&P 500 ETF Trust’s (SPY) 16.1% decline over the same period.
Meanwhile, the reopening of China’s borders after strict COVID-19 restrictions spurred optimism in the energy market and raised oil prices. Moreover, OPEC+ seems intent on keeping the oil market tight to prevent prices from dropping if a recession materializes.
According to Goldman Sachs, global oil demand is expected to increase by 2.7 million barrels per day (BPD) in 2023. The investment bank expects this to drive oil prices above $100 this year, and Brent Crude could trade at $105 per barrel by the fourth quarter.
Furthermore, John LaForge, head of the global real asset strategy at Wells Fargo Investment Institute, stated, “Within commodity sectors we like energy the best and suspect that oil prices are on track for another positive year, driven by production challenges and strategic opportunities in large oil-producing countries.”
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.
On January 5, UNTC announced a special cash dividend of $10 per share and approved a quarterly cash dividend policy beginning in its second quarter. The special dividend is payable to shareholders on January 31, 2023. This reflects the company’s ability to pay back its shareholders.
The stock’s trailing-12-month gross profit margin of 48.23% is 18.5% higher than the industry average of 40.70%. Its trailing-12-month EBIT margin of 28.86% is 49.6% higher than the industry average of 19.29%. Also, its trailing-12-month net income margin of 23.85% is 109.6% higher than the industry average of 11.38%.
For the fiscal quarter that ended September 30, 2022, UNTC’s income from operations rose 39% from the prior-year quarter to $66.26 million. Net income attributable to UNTC and its per common share value came in at $55.82 million and $5.60 per share, which increased 786.7% and 918.2% year-over-year, respectively.
Shares of UNTC have gained 24.6% over the past six months to close the last trading session at $62.94. Moreover, it has gained 10.4% over the past month.
UNTC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
UNTC also has an A grade for Momentum and Quality and a B for Value. The stock is ranked #5 out of the 92-stock B-rated Energy – Oil & Gas industry. Click here for additional ratings on Growth, Stability, and Sentiment for UNTC.
Adams Resources & Energy, Inc. (AE)
AE markets, transports, and stores various U.S. crude oil and natural gas basins. The company has three operational segments: Crude Oil Marketing, Transportation and Storage; Tank truck Transportation of Liquid Chemicals, Pressurized Gases, Asphalt, and Dry Bulk; and Pipeline Transportation, Terminalling and Storage of Crude Oil.
On November 10, 2022, AE declared a quarterly cash dividend for the third quarter of 2022 of $0.24 per common share, which was payable on December 16. The company has consistently paid a dividend since 1994. This reflects the shareholder return ability of the company.
In the same month, AE announced the repurchase of all of the shares of Adams common stock owned by KSA Industries, Inc. The total purchase price was approximately $70 million or $36 per share and would be funded by a combination of existing cash on hand and a new term loan.
Along with the company’s recent acquisitions, repurchasing of shares is expected to enhance the value for all remaining shareholders. Kevin Roycraft, Chief Executive Officer of the company, said, “The company will also see an immediate annual savings of roughly $1.9 million in dividend payments at the current dividend rate.”
For the fiscal third quarter that ended September 30, AE’s total revenues increased 50.1% year-over-year to $852.90 million. Its operating earnings grew 30.1% from the prior-year quarter to $2.99 million, while its net earnings grew 41.7% from its year-ago value to $2.19 million. The company’s net earnings per common share improved 38.9% from its year-ago value of $0.50.
The consensus EPS estimate of $4.01 for the fiscal year ending December 2023 represents a 19% improvement year-over-year. The company’s revenue is expected to come in at $3.10 billion.
The stock has gained 26.6% over the past six months and 33.7% over the past three months to close the last trading session at $40.45.
AE’s POWR Ratings reflect its promising prospects. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock also has an A grade for Momentum and Sentiment and a B for Value and Quality. Within the same industry, it is ranked #3. Click here to see the additional POWR Ratings for AE (Stability and Growth).
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UNTC shares were unchanged in premarket trading Wednesday. Year-to-date, UNTC has gained 8.78%, versus a 2.13% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors. More...
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