Bulletin
Investor Alert

July 26, 2022, 8:05 a.m. EDT

Here are the top 5 energy stocks, according to Goldman Sachs

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    Energy Select Sector SPDR ETF (XLE)
  • X
    S&P 500 Index (SPX)
  • X
    Diamondback Energy Inc. (FANG)

or Cancel Already have a watchlist? Log In

By Claudia Assis

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 /zigman2/quotes/206420077/composite XLE -6.90% has tumbled about 20% since closing at an eight-year high on June 8 through afternoon trading on Friday, while the S&P 500 index /zigman2/quotes/210599714/realtime SPX -1.72% has lost 3.6% over the same time.

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 /zigman2/quotes/201200230/composite FANG -8.96% recent shift to higher free cash flow allocations toward capital returns “should help differentiate the company relative to peers,” the analysts said.

Highlights for Chesapeake Energy Corp. /zigman2/quotes/224537584/composite CHK -5.68% are its natural-gas assets, which underpin “attractive (free cash flow) generation supported by a strong balance sheet,” the analysts said.

“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. /zigman2/quotes/206736173/composite PXD -7.79% has outperformed “peers since the recent correction, which we believe is in part due to its strong balance sheet and attractive dividend yield,” the Goldman analysts said.

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. /zigman2/quotes/209305691/composite EQT -7.55% is well positioned to benefit from a favorable long-term natural gas outlook, and enjoys upside from better capitalefficiency 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 capitalreturns,” the Goldman Sachs analysts said.

Natural-gas producer Ovintiv Inc. /zigman2/quotes/204243091/composite OVV -8.91% , formerly known as Encana, is on Goldman’s radar as its free cash flow allocation toward share buybacks “can allow the shares to close the relative gap vs. peers,” the analysts said.

/zigman2/quotes/206420077/composite
US : U.S.: NYSE Arca
$ 70.48
-5.22 -6.90%
Volume: 52.74M
Sept. 23, 2022 4:00p
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,693.23
-64.76 -1.72%
Volume: 2.22B
Sept. 23, 2022 5:04p
loading...
/zigman2/quotes/201200230/composite
US : U.S.: Nasdaq
$ 115.20
-11.34 -8.96%
Volume: 3.56M
Sept. 23, 2022 4:00p
P/E Ratio
5.38
Dividend Yield
6.25%
Market Cap
$20.49 billion
Rev. per Employee
$10.47M
loading...
/zigman2/quotes/224537584/composite
US : U.S.: Nasdaq
$ 92.93
-5.60 -5.68%
Volume: 3.19M
Sept. 23, 2022 4:00p
P/E Ratio
8.77
Dividend Yield
2.07%
Market Cap
$11.23 billion
Rev. per Employee
$8.63M
loading...
/zigman2/quotes/206736173/composite
US : U.S.: NYSE
$ 208.99
-17.66 -7.79%
Volume: 3.51M
Sept. 23, 2022 4:00p
P/E Ratio
8.65
Dividend Yield
11.18%
Market Cap
$49.88 billion
Rev. per Employee
$12.26M
loading...
/zigman2/quotes/209305691/composite
US : U.S.: NYSE
$ 41.26
-3.37 -7.55%
Volume: 10.57M
Sept. 23, 2022 4:02p
P/E Ratio
N/A
Dividend Yield
1.45%
Market Cap
$15.24 billion
Rev. per Employee
$15.13M
loading...
/zigman2/quotes/204243091/composite
US : U.S.: NYSE
$ 42.62
-4.17 -8.91%
Volume: 6.28M
Sept. 23, 2022 4:00p
P/E Ratio
4.64
Dividend Yield
2.35%
Market Cap
$10.84 billion
Rev. per Employee
$7.73M
loading...

This Story has 0 Comments
Be the first to comment
More News In
Industries

Story Conversation

Commenting FAQs »

Partner Center

Link to MarketWatch's Slice.