September Rally? 3 Energy Stocks to Buy Before Liftoff
The energy sector is undergoing a major transformation as the world shifts to cleaner and more sustainable sources of power. Renewable energy is expected to grow rapidly in the coming years, driven by technological innovation, policy support and consumer demand. However, most energy systems are dominated by non-renewable sources of energy, primarily natural gas followed by coal. Energy prices are on the rise again in the United States. This spells good things for energy stocks.
Despite being at the end of the summer, gasoline prices remain elevated due to a few market events. For one, Saudi Arabia and Russia have continued to cut oil production. Moreover, falling oil inventory numbers in the U.S. have also contributed to speculation of higher crude prices in the near term.
In this article, we will look at three energy stocks that could benefit from the current macroeconomic backdrop as higher energy prices move upward.
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Itron (ITRI)
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In a time of higher energy prices, a smart meter is crucial for optimizing costs. Itron (NASDAQ:ITRI) is a leading provider of smart metering and grid management solutions for utilities and cities. The company helps its customers measure, manage and optimize energy and water resources, enabling them to improve overall efficiency.
Itron recently reported strong financial results for the second quarter of 2023, with revenue of $541.1 million, up 25.3% year-over-year. There were also adjusted earnings per share of $0.65, up more than 8x or $0.58 year-over-year. Citing operational efficiencies and better supply chain conditions, the company also decided to raise its full-year guidance, expecting revenue of $2.6 billion to $2.7 billion and adjusted earnings per share of $3.40 to $3.70.
Along with elevated energy prices, Itron is benefiting from several secular trends, such as the increasing adoption of smart meters, the rising demand for grid modernization and resilience, and the growing need for data analytics and software solutions. Moreover, the company has a strong backlog of $4.5 billion, which provides visibility and stability for its future revenue. While shares have risen 35.2% year-to-date, investors have a lot of reasons to be hopeful. They can tell that this is one of the top energy stocks on the market today.
NextEra Energy (NEE)
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NextEra Energy (NYSE:NEE) stock has had a tough year. Shares having fallen 20.0% year-to-date, creating ample entry point opportunities for investors interested in this dynamic utilities platform. To recap, NextEra is one of the largest electric utility companies in the world and serves than 12 million customers across Florida. The company also owns NextEra Energy Resources, which is the world’s largest generator of renewable energy from the wind and sun and a world leader in battery storage. For a company that used to primarily focus on non-renewable natural gas assets, this dramatic yet committed switch to clean energy is both noble and attractive. NextEra plans to sell the remainder of its natural gas pipelines by 2025.
This has been a record year of business performance for NextEra. In the first quarter of 2023, NextEra Energy benefitted tremendously from its solar and wind assets and reported net income of $1.522 billion on a GAAP basis, up 26% year over year, and $1.011 billion on an adjusted basis, up 24% year over year. Second quarter results also came in above Wall Street estimates.
Florida remains a state to which many Americans and businesses want to relocate; thus, NextEra and its shareholders will be able to benefit from higher utilities demand in the years to come.
Array Technologies (ARRY)
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Array Technologies (NASDAQ:ARRY) is a solar energy company but not in the way one might expect. Rather than developing solar panel technology, Array manufactures solar tracking systems that enable solar panels to follow the sun throughout the day, thereby maximizing their energy output. The company’s products are used in utility-scale and large commercial solar projects across the globe. From a financial performance perspective, Array Technologies also goes above and beyond. In 2022, Array reported $1.6 billion in sales, which represented an impressive 91.9% year-over-year growth rate. The company has continued that trend with strong quarterly earnings beats this year.
Array expects the Inflation Reduction Act (IRA) will help drive demand for its products as companies begin to increase their use of solar panels. As prices for oil and natural gas continue to tick upward, clean energy will become even more attractive. Furthermore, the increasing adoption of renewable portfolio standards, the extension of federal tax credits, and the growing awareness of environmental and social issues will help drive Array’s shares upward in the future.
On the date of publication, Tyrik Torres 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.
Tyrik Torres has been studying and participating in financial markets since he was in college, and he has particular passion for helping people understand complex systems. His areas of expertise are semiconductor and enterprise software equities. He has work experience in both investing (public and private markets) and investment banking.
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