The energy sector is going through massive changes – you don’t need me to tell you that. Obviously, one of the key drivers for energy stocks is simple math. With global population growth, the more humans that exist, the more resources that they consume. But the biggest catalyst for power producers and related resource enterprises may be technology.
Yes, we can talk about artificial intelligence. Thanks to the rise of generative AI and the data centers that undergird the innovation, power demands have skyrocketed; so much so that The Washington Post warned earlier this year that the U.S. is running out of power. But it’s not just about the raw consumption that warrants a closer look at energy stocks.
Rather, technology promotes social equity. That doesn’t mean that there won’t be inequality – that will always be present. However, as people across the globe gain access to digital innovations and infrastructures, their economic potential rises. And when that happens, they become socially (and literally) mobile. That’s why you need a holistic view regarding energy stocks to buy.
Chevron (CVX)
One of the biggest energy stocks in the world, Chevron (NYSE:CVX) falls under the integrated oil and gas sector. That simply means the company has its hands on multiple components of the hydrocarbon value chain: upstream, midstream and downstream. One aspect that distinguishes Chevron from other players in the energy space is its forward vision. For example, the company has invested in nuclear fusion, making it an intriguing enterprise.
Still, being intriguing is only part of the battle. Recently, the company disclosed its second-quarter earnings results, missing expectations due to lower refining margins. It’s also relocating its headquarters to Texas from California due to mounting regulations in the Golden State. However, it’s possible that the narrative for CVX stock could be favorable if Republicans win out in this election cycle.
Another aspect to consider is the valuation. With the recent volatility stemming in part from the earnings miss, CVX stock trades at 1.4X trailing-year sales. In the past year, this metric stood at 1.43X. Further, fiscal 2024 sales could see a bump up to $200.85 billion. That would be an increase of 7% from last year.
Occidental Petroleum (OXY)
One of the factors that make Occidental Petroleum (NYSE:OXY) an exciting idea among energy stocks is Warren Buffett. Through his conglomerate Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B), the Oracle of Omaha has been scooping up OXY stock. More importantly, Occidental is a leader in the oil and gas exploration and production industry, otherwise known as upstream.
With geopolitical flashpoints recently raging, Occidental could be in a cynical position to benefit. The world faces the risk of oil supply chain disruptions. Therefore, we all could use not only extra inventory of hydrocarbons but a reliable sourcing of the product as well. That’s where Occidental could potentially shine (and may be why Buffett is a buyer).
Right now, OXY stock trades at 2.04X trailing-year revenue. That’s marginally higher than the prior year’s average of 1.97X, demonstrating consistency. It’s also a discount from Q1’s average print of 2.21X.
Looking ahead to year’s end, analysts as a consensus see a slight decline in revenue to $28.53 billion. However, the high-side estimate (which seems more realistic given the fundamentals) calls for $30.07 billion.
Kinder Morgan (KMI)
A leader within the midstream component of the hydrocarbon value chain, Kinder Morgan (NYSE:KMI) is vital to infrastructural integrity. Midstream operators focus on the storage and transportation of crude oil and natural gas, among other energy-related resources. When you hear on the news about pipeline projects, you’re dealing with the midstream sector.
Essentially, Kinder Morgan is the connection point between the explorers who “hunt” for crude oil and the downstream operators who provide fuel for your vehicle. Because it’s so vital to the proper running of the economy, KMI makes for an excellent idea for energy stocks. You can talk all you want about energy technologies and new sources of power: you still need to have someone store and transport that stuff.
Now, at 2.99X sales, KMI stock is pricey. Further, the average multiple in the past year was 2.56X. However, the company makes up for it with a forward dividend yield of 5.56%.
Also, looking out to year’s end, sales could rise to $16.16 billion. That’s up 6.6% from last year.
Baker Hughes (BKR)
Operating in the equipment and services segment of the hydrocarbon industry, Baker Hughes (NASDAQ:BKR) provides a portfolio of technologies and services to energy and industrial value chains worldwide. Although the mainline business focuses on oil and gas – hardly an innovative arena – the world may continue to run on fossil fuels. Therefore, BKR represents one of the most important energy stocks to consider.
A strong selling point behind BKR stock is the underlying financial performance. It’s a consistent player, generating an average earnings per share of 48 cents in the past year since Q2. This figure also beat the collective consensus view of 44 cents, yielding an earnings surprise of nearly 9%. Plus, it’s noteworthy that Q2 was particularly robust, generating an earnings surprise of 16.3%.
Despite its selling points, BKR stock is relative undervalued. Right now, shares trade hands at 1.33X sales. In the past year, this metric stood at 1.41X. It was even as high as 1.53X (during Q3 2023). Finally, analysts believe that fiscal 2024 sales could rise to $28.06 billion. If so, that would be a lift of 10%.
First Solar (FSLR)
Based in Tempe, Arizona, First Solar (NASDAQ:FSLR) obviously falls under the solar technology space. It’s one of the biggest companies in the industry, featuring 6,700 full-time employees. The company provides photovoltaic (PV) solar energy solutions; specifically, it sells PV solar modules with a thin-film semiconductor technology that provides a lower-carbon alternative to conventional PVs.
It’s not just a narrative we’re talking about here: the results are tangible. In the past year since Q2, the company posted an average EPS of $2.80, yielding an earnings surprise of 14.15%. Further, the most recent Q2 report was especially strong, generating an EPS of $3.25. This easily beat the consensus target of $2.69.
Now, that performance comes at a cost. FLSR stock isn’t cheap at 6.08X sales. However, that’s a very modest lift from the prior year’s average of 5.97X. Also, in Q2 of last year, FSLR carried a multiple of 7.24X.
For fiscal 2024, analysts project sales of $4.49 billion, up 35.4% from last year. It’s easily one of the energy stocks to buy.
Cameco (CCJ)
A uranium specialist, Cameco (NYSE:CCJ) might be considered a controversial enterprise. While the nuclear energy industry is an important one, underlying facilities can cause devastation if circumstances go awry. Now, such circumstances are thankfully rare but they have happened. Nevertheless, as safety standards are improved, nuclear-related energy stocks will likely become more attractive.
Fundamentally, that’s because no other resource commands the energy density that nuclear fuel offers. Moreover, as resource consumption increases due to the rise of generative AI and data centers, societies will need access to reliable sources of electricity generation. With hydrocarbon supplies facing supply chain risks due to geopolitical tensions, the nuclear industry may thrive.
It must be stated that CCJ stock isn’t cheap, trading hands at 8.63X trailing-year sales. However, in the past year, the average stood at 10.82X. So, in that sense, Cameco appears relatively undervalued.
Adding to the attractiveness, analysts project fiscal 2024 sales to hit $2.19 billion. That’s up 15.9% from the prior year’s tally of $1.89 billion, making CCJ one of the energy stocks to buy.
Bloom Energy (BE)
We can’t talk about energy stocks without mentioning some emerging technologies. That’s where Bloom Energy (NYSE:BE) enters front and center stage. Technically, Bloom falls under the electrical equipment and parts industry. Primarily, the company designs, manufactures, sells and installs solid-oxide fuel cell systems for onsite power generation. It sells its products to various entities, including utilities, data centers and agricultural centers, among many others.
While the world may continue to run on fossil fuels for the foreseeable future, the ideological and political winds are moving toward clean and sustainable energy sources. Yes, even with a Donald Trump victory in November, entities like Bloom will likely be relevant. This old guard politics of ‘Murica! is anachronistic and will likely fade away. In its place will be ideologies that support clean energy solutions.
Right now, BE stock trades hands at 1.98X sales. That’s a modest discount to the prior year’s average of 2.1X. During Q1 of last year, this metric stood at 3.09X. So, there’s potential for growth.
Fiscal 2024 sales projections call for $1.46 billion. That’s up 9.7% from last year. Fiscal 2025 could see revenue of $1.79 billion, making Bloom a risky but tempting proposition.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.