Here are the top 5 energy stocks, according to Goldman Sachs
Goldman Sachs on Monday picked five top energy stocks of ahead of their quarterly earnings, saying it keeps a “constructive” view on the sector thanks to cash flows and valuations, among other highlights.
Investor sentiment has turned “more negative” on the E&P sector, due to concerns about a looming global recession, the analysts at Goldman Sachs said. The SPDR Energy Select Sector exchange-traded fund XLE,
The analysts, however, “maintain a long-term constructive/bullish posture given strong cash flow, discounted valuation, the growing strategic value of U.S. gas/oil, and improving returns on and of capital,” they said.
A “key focus” for the quarter will be on production execution, the ability to manage costs amid higher inflation, capital returns outlook, and managing commodity risks through hedging, the analysts said.
Here are the five top picks for the Goldman Sachs analysts:
Diamondback Energy Inc.’s FANG,
Highlights for Chesapeake Energy Corp. CHK,
“We believe (Chesapeake Energy) is on track to provide strong capital returns to shareholders and close the value gap vs. its peers,” including a 16% dividend yield over the next four quarters.
Unlike Diamondback Energy and Chesapeake Energy, Pioneer Natural Resources Co. PXD,
Goldman expects Pioneer to declare an $8.24 a share dividend, which would be an about 15% annualized divided yield, “which we believe can be further enhanced longer-term through modest production growth and opportunistic share repurchases.”
EQT Corp. EQT,
efficiency from its new-well design plus exposure to improved pricing.
“We see potential for EQT shares to re-rate with further balance sheet improvement and more allocation of FCF toward capital
returns,” the Goldman Sachs analysts said.
Natural-gas producer Ovintiv Inc. OVV,