High Energy Momentum: Top-Ranked Oil Stocks Breaking Out Now
Energy prices have been trading emphatically higher over the last two months after moving sideways to lower for most of 2023. Most recently, the Energy Sector ETF XLE broke out of a large bullish wedge, and WTI Crude oil prices moved above the 200-day moving average signaling a shift in the trend.
With the US economy remaining stubbornly strong, and growth trends having possibly bottomed out, energy stocks may be ready for another run after last year’s market leading performance.
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I have identified three energy stocks, with top Zacks Ranks, and high-probability momentum trade setups for investors to keep their eyes on. Crescent Point Energy CPG, Evolution Petroleum EPM, and Global Partners GLP all show a trifecta of variables that may lead to explosive moves higher. Upward trending earnings revisions, historically depressed valuations, and technical chart patterns all dramatically improve the odds of a breakout in these stocks.
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Crescent Point Energy
Crescent Point Energy is a Canadian oil and gas exploration and production company. As an independent energy firm, CPG focuses on the acquisition, development, and production of crude oil and natural gas reserves primarily in Western Canada and the United States.
Just last week, Crescent Point Energy stock broke out of a convincing technical chart pattern. After building out a bull flag for most of 2023, the price broke out above the critical $7.40 level, and has since moved forcefully higher. Although the move has already begun, it is probably not too late to hop on board, and so long as CPG stock holds above the breakout level, it should continue to rally.
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Crescent Point Energy has a Zacks Rank #1 (Strong Buy) rating, reflecting upward trending earnings revisions. FY23 earnings estimates have been upgraded by 6.6% over the last two months to $1.29 per share and FY24 earnings estimates have been upgraded by 6.1% to $1.22 per share.
CPG is trading at a one-year forward earnings multiple of 6x, which is below the industry average of 9.3x, and below its 10-year median of 21.8x. Further sweetening the setup, Crescent Point Energy offers a 3.8% dividend yield, and has raised the payout by an average of 37% annually over the last five years.
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Evolution Petroleum
Evolution Petroleum is an independent oil and gas company based in the United States. The company primarily focuses on the development and production of oil and natural gas reserves, with a particular emphasis on unconventional resources. Evolution Petroleum has a strategic approach to its operations, seeking to maximize production efficiency and economic returns through innovative technologies and sound reservoir management practices.
EPM has been forming a consolidation just below multi year highs for the past two months. If the price can trade above the $8.55 level, the stock should make a nice bull run higher. Alternatively, if it can’t hold above the $7.75 level, the setup is invalid, and investors should wait for another setup.
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Evolution Petroleum has a Zacks Rank #1 (Strong Buy), indicating upward trending earnings revisions. FY24 earnings estimates have been revised higher by 2.9% to $1.08 per share. Additionally, although the estimates have not been upgraded FY23 earnings are projected to grow 15.6% YoY, while sales are forecast to grow 21% over the same period.
EPM is trading at a one-year forward earnings multiple of 7.6x, which is below the industry average of 9.4x and below its 10-year median of 17.8x. Additionally, Evolution Petroleum pays a 5.83% dividend and has raised the payment by an average of 69% annually over the last 3 years.
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Global Partners
Global Partners is a midstream logistics company based in the United States. The company is primarily engaged in the storage, transportation, and distribution of petroleum products, including gasoline, diesel, heating oil, and jet fuel. GLP operates an extensive network of terminals, pipelines, and other infrastructure assets that facilitate the efficient movement of energy products across various regions in the Northeastern United States.
GLP has carved out a tight consolidation over the last few months from which it recently broke out above. After trading above the $32 level, it retested the breakout and moved convincingly higher during Monday’s trading session. So long as the price doesn’t trade back into the consolidation, I think Global Partners stock could trade much higher.
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GLP currently has a Zacks Rank #1 (Strong Buy) rating, demonstrating upward trending earnings revisions. Next quarter earnings estimates have been boosted by 7.6% over the last two months and FY24 earnings estimates have been revised higher by 5%.
Global Partners is trading at a one-year forward earnings multiple of 9.4x, which is below the industry average of 11.2x, and below its 10-year median of 19.4x. The stock also boasts a hefty dividend yield of 8.2% and has raised the dividend payment by an average of 18.5% annually over the last three years.
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Bottom Line
Traders looking for exposure to energy stocks should consider the stocks listed above. In addition to the quality trade setups, and tailwinds of strong energy prices, these stocks also offer high income through dividends, making them even more compelling investment options. As always, investors should keep risk management top of mind, as even the best trading setups fail. Best of luck traders!
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Global Partners LP (GLP) : Free Stock Analysis Report
Energy Select Sector SPDR ETF (XLE): ETF Research Reports
Evolution Petroleum Corporation, Inc. (EPM) : Free Stock Analysis Report
Crescent Point Energy Corporation (CPG) : Free Stock Analysis Report
