The energy sector is once again in the spotlight as oil prices surge and energy demand continues to grow around the world. Below, I have discussed three energy stocks, namely, Liberty Energy Inc. (LBRT), MRC Global Inc. (MRC), and Mammoth Energy Services, Inc. (TUSK), with significant potential to boost your portfolio returns.
Yesterday, oil prices jumped by about 2%, fueled by a falling U.S. dollar, increased demand from developing nations, and supply cuts by the world's largest oil exporters. Brent futures rose by 2.2% to settle at $79.40 a barrel, and U.S. West Texas Intermediate (WTI) crude rose by 2.5% to settle at $74.83.
The International Energy Agency (IEA) has predicted that the oil market will remain tight in the second half of the year, citing strong demand from China and developing countries combined with supply cuts by top exporters such as Saudi Arabia and Russia.
Saudi Arabia will extend its 1 million barrel per day (bpd) output cut into August, and Russia will cut crude exports by 500,000 bpd. The cuts amounted to 1.5% of global supply, bringing the total pledged by OPEC+ to 5.16 million bpd.
Adding to the optimism, the secretary general of the Organization of the Petroleum Exporting Countries (OPEC) has forecasted the global energy demand to increase by 23% by the end of 2045.
Moreover, the global energy as a service market is expected to expand at a CAGR of 15.1% to reach $212.60 billion by 2028. The energy sector exhibits immense potential to grow and expand in the coming years.
To that end, let’s look at the fundamentally sound energy stocks you could consider to help boost your portfolio.
Liberty Energy Inc. (LBRT)
LBRT provides hydraulic services and related technologies to North American onshore oil and natural gas exploration and production companies. It offers customers hydraulic fracturing and complementary services, including wireline services, proppant delivery solutions, data analytics, related goods (including its sand mine operations), and technologies.
On June 20, the company paid its shareholders a dividend of $0.05 per share of Class A common stock. LBRT’s four-year average dividend yield is 1.05%, while its annual dividend translates to a 1.33% yield on the current prices.
On April 10, LBRT launched Liberty Power Innovations (LPI), which provides alternative fuel and power solutions for remote applications, focusing on CNG supply, field gas processing and treating, and on-site fueling and logistics.
This change is essential for maintaining efficient on-site operations, which is key to the company’s industry-leading returns. LPI will supply fuel to Liberty and the rest of the industry, contributing to the company’s growth.
LBRT’s trailing-12-month ROCE of 40.24% is 69.3% higher than the 23.77% industry average. Likewise, its trailing-12-month ROTC and ROTA of 25.53% and 20.56% compare to the industry averages of 11.21% and 8.81%, respectively.
During the fiscal first quarter, which ended March 31, 2023, LBRT’s revenue increased 59.2% year-over-year to $1.26 billion. Its operating income improved significantly from the year-ago value to $225.12 million.
The company’s net income amounted to $162.75 million and $0.90 per share compared to a net loss of $5.48 million and $0.03 per share in the prior-year quarter. Also, its adjusted EBITDA came in at $329.88 million, reflecting a 259.2% improvement year-over-year.
For the fiscal second quarter ended June 30, 2023, LBRT’s EPS estimate of $0.96 indicates a 66.6% year-over-year growth. Its revenue for the to-be-reported quarter is expected to increase 36.9% year-over-year to $1.29 billion. The company surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is promising.
LBRT’s EPS and net income have improved at impressive CAGRs of 124.9% and 192.8% over the past three years, while its EBITDA increased at a 64.2% CAGR.
Over the past year, the stock has gained 25% to close the last trading session at $15.05.
LBRT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Momentum and a B for Growth and Value. Among the 47 stocks in the Energy - Services industry, it is ranked #9. Click here to see the other ratings of LBRT for Stability, Sentiment, and Quality.
MRC Global Inc. (MRC)
MRC is a global distributor of Pipe, Valves, and Fittings (PVF) and other infrastructure products and services to diversified energy, industrial, and gas utility end-markets. It provides supply chain solutions and digital platforms to its customers in the United States, Canada, and internationally.
MRC’s trailing-12-month ROCE and ROTC of 18.38% and 8.14% are 31.8% and 16.2% higher than the industry averages of 13.94% and 7%, respectively. Also, its asset turnover ratio of 1.84x compares to the industry average of 0.80x.
For the first quarter that ended March 31, 2023, MRC’s sales increased 19.3% year-over-year to $885 million, while its gross profit grew 31.6% from the year-ago value to $179 million. Its operating income improved by 96.5% from the same period last year to $57 million.
The company’s adjusted attributable net income amounted to $27 million and $0.32 per share, reflecting an increase of 80% and 88.2%, respectively, from the prior-year quarter. Also, its adjusted EBITDA stood at $69 million, up 43.7% year-over-year.
The consensus EPS estimate of $0.38 for the fiscal second quarter (ended June 30, 2023) represents a 40.7% improvement year-over-year. The consensus revenue estimate of $914.68 million for the to-be-reported quarter indicates a 7.9% increase from the same period last year. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters.
Over the past three years, its EBIT and net income have increased at 19.5% and 45.8% CAGR, respectively. Also, its EPS has improved at a 123.2% CAGR over the same period.
The stock has gained 18.3% over the past nine months to close the last trading session at $10.10.
MRC’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
It has an A grade for Growth and Momentum and a B for Value and Sentiment. It is ranked #6 of 47 stocks within the same industry. To see additional POWR Ratings of MRC for Stability and Quality, click here.
Mammoth Energy Services, Inc. (TUSK)
TUSK is an integrated energy services company that provides products and services to enable the exploration and development of North American onshore unconventional oil and natural gas reserve. It operates in four segments: Infrastructure Services; Well Completion Services; Natural Sand Proppant Services; and Drilling Services.
TUSK’s total revenue increased 86.7% year-over-year to $116.32 million in the first quarter (ended March 31, 2023), while its adjusted EBITDA improved by 231.8% from the year-ago value to $30.70 million. Its operating income came in at $6.35 million compared to an operating loss of $17.82 million in the same period last year.
The company’s net income amounted to $8.35 million and $0.17 per share versus a net loss of $14.82 million and $0.32 per share, respectively, in the prior-year quarter.
Street expects TUSK’s EPS for the fiscal year 2023 to increase significantly year-over-year to $0.48, while its revenue is expected to be $376.56 million, reflecting a 4% year-over-year growth.
TUSK’s shares have gained 31.8% over the past nine months and 123.7% over the past year to close the last trading session at $5.01.
It’s no surprise that TUSK has an overall rating of B, which equates to Buy in our proprietary rating system. It has an A grade for Momentum and Sentiment and a B for Growth and Value. Out of 47 stocks in the same industry, it is ranked #11.
In addition to the POWR Ratings we’ve stated above, we also have TUSK’s ratings for Stability and Quality. Get all TUSK ratings here.
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LBRT shares were trading at $15.27 per share on Wednesday afternoon, up $0.22 (+1.46%). Year-to-date, LBRT has declined -3.97%, versus a 17.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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