Here's Why Hold Strategy is Apt for Cenovus (CVE) Stock Now
Cenovus Energy Inc. CVE has witnessed upward earnings estimate revision for 2023 in the past seven days.
The Zacks Consensus Estimate for the Zacks Rank #3 (Hold) company’s 2023 and 2024 earnings are pegged at $1.64 and $2.09 per share, respectively.
Factors Favoring the Stock
Global crude oil prices have been substantially higher over the past year. The favorable oil price scenario is a boon for Cenovus’ upstream operations.
The company has significant oil reserves in the oil sands of Alberta, Canada, which are among the largest proven oil reserves in the world. We expect the company’s daily oil sand production to increase 4.2% in 2023, boosting profits. This growth indicates Cenovus’ ability to tap into its valuable resource base and generate increased revenues and earnings.
Like upstream businesses, Cenovus benefits from its strong refinery utilization. The company anticipates a substantial increase in downstream throughput volumes, with expectations set between 580,000 and 610,000 barrels per day for 2023. This demonstrates Cenovus’ ability to process and refine its oil production, creating additional value and revenue streams from its oil and gas resources. Increased downstream throughput can contribute to overall financial stability and a more balanced business portfolio for the company.
Cenovus remains dedicated to debt reduction through free cash flow generation and asset divestment. The company achieved a remarkable feat in 2022 by reducing its net debt by more than 50%. This commitment to debt reduction is expected to persist into 2023.
Cenovus' dedication to the energy transition is praiseworthy. The company has outlined its intention to achieve a 35% reduction in absolute greenhouse gas emissions by the end of 2035 and is committed to attaining net-zero emissions by 2050. These ambitious targets underscore Cenovus' commitment to addressing climate change and transitioning to more sustainable energy practices.
Risks
Cenovus discontinued its practice of crude price hedging as it realized steep losses on its existing risk management program. While this policy helps capture upside exposure to the near to medium-term rebalancing of oil markets, the lack of any hedge protection makes Cenovus more exposed to potential weakness in crude prices than some of its peers.
Key Picks
Investors interested in the energy sector might look at the following companies that presently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
USA Compression Partners USAC is a leading energy infrastructure provider, which specializes in large-horsepower applications. The stability in cash flow for USA Compression Partners has enabled it to maintain a steady quarterly distribution of 52.50 cents since the second quarter of 2015.
USA Compression Partners has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 30 days. The consensus estimate for USAC’s 2023 and 2024 earnings per share is pegged at 30 cents and 58 cents, respectively.
Cactus Inc. WHD generates significant cash flows from selling and renting the wellhead and pressure control equipment. The company is strongly focused on returning capital to shareholders, as reflected in its recent announcement of a share repurchase program of up to $150 million.
Cactus has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 60 days. The consensus estimate for WHD’s 2023 and 2024 earnings per share is pegged at $2.79 and $3.38, respectively.
Pioneer Natural Resources Company PXD is an explorer and producer of oil, natural gas and natural gas liquid. The upstream energy player’s debt to capitalization has been persistently lower than the industry over the past few years, reflecting considerably lower debt exposure.
Pioneer has witnessed upward earnings estimate revisions for 2023 and 2024 in the past seven days. The consensus estimate for PXD’s 2023 and 2024 earnings per share is pinned at $21.42 and $25.27, respectively.
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Cenovus Energy Inc (CVE) : Free Stock Analysis Report
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