ConocoPhillips, Chevron Corp., and Diamondback Energy are the 3 Best Energy Stocks to Buy in May 2024, according to Wall Street analysts. We used the TipRanks Best Energy Stocks tool to unearth the three oil stocks that are favored by analysts and have a reasonable share price appreciation potential. The U.S. WTI crude oil prices have gained roughly 8.3% so far in 2024 due to the ongoing crisis in the Middle East, slightly lagging the 10% gain in the S&P 500 index (SPX). Energy investors are cautious due to the uncertainty related to the interest rate cuts and the macro environment.
The energy sector has different sub-segments, including oil exploration companies, drilling companies, refining companies, and oilfield services and equipment providers. The three companies discussed today belong to the exploration and drilling sub-segment. These companies have a Strong Buy consensus rating and are expected to offer over 15% upside potential in the next twelve months. What’s more, energy companies usually pay attractive dividends to shareholders, thus enhacing their rewards.
#1 ConocoPhillips (NYSE:COP)
ConocoPhillips is one of the world’s largest independent exploration and production (E&P) companies. It has oil and natural gas production facilities across 13 countries. Importantly, COP announced its intent to buy Marathon Oil Corporation (NYSE:MRO) for $22.5 billion. The all-stock deal includes $5.4 billion in net debt.
Meanwhile, COP is slated to pay a quarterly dividend of $0.78 per share on June 3, reflecting a yield of 3.01%. Its dividend is made up of two parts; base dividend of $0.58 per share and variable return of cash (VROC) of $0.20 per share.
Remarkably, the company is set to raise its base dividend by an impressive 34% to $0.78 per share, beginning in Q4 FY24. Furthermore, COP continues to buy back shares to reward shareholders. In Q1 FY24, COP repurchased $1.3 billion worth of shares. Following the planned acquisition of MRO, COP aims to buyback $7 billion worth of shares in the first year after closing of the deal.
In Q1, COP’s adjusted earnings per share (EPS) of $2.03 missed analysts’ consensus by one cent. Also, revenues of $13.79 billion fell short of the consensus of $14.96 billion. Production for the first quarter stood at 1.902 MBOED (million barrels of oil equivalent per day), up 110 thousand BOED compared to Q1 FY23. For Q2, COP guided for production between 1.91 and 1.95 MBOED.
Is COP a Good Stock to Buy Now?
With 13 Buys and two Hold ratings, COP stock has a Strong Buy consensus rating on TipRanks. The average ConocoPhillips price target of $146.71 implies 29.2% upside potential from current levels. In the past year, COP shares have gained 14.4%.
#2 Chevron Corp. (NYSE:CVX)
Chevron is one of the world’s largest integrated energy companies. It produces crude oil and natural gas, manufactures transportation fuels, lubricants, petrochemicals, and additives, and develops technologies to enhance business and industry.
CVX is set to buy oil major Hess Corp (NYSE:HES) in a massive $53 billion deal, which recently received the approval of Hess shareholders. The deal is pending regulatory approval.
Notably, CVX board raised the quarterly dividend payout by 8% to reach $1.63 per share. This reflects an above-industry average yield of 3.87%. Moreover, CVX repurchased nearly $3 billion worth of shares in Q1 FY24.
In the three months ending March 31, Chevron’s revenues exceeded the consensus while adjusted EPS marginally short of expectations. Notably, production in Q1 grew 12.4% year-over-year to 3.346 MBOED.
What is the Price Target for CVX?
On TipRanks, the average Chevron price target of $187.20 implies 18.3% upside potential from current levels. CVX stock commands a Strong Buy consensus rating based on 12 Buys and three Hold recommendations. In the past year, CVX shares have gained over 5%.
#3 Diamondback Energy (NASDAQ:FANG)
Diamondback Energy is an independent oil and natural gas company. It engages in the acquisition, development, exploration, and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas.
Diamondback Energy is also set to merge with Endeavor Energy Resources, L.P. in a $26 billion cash and stock deal. The merger will form the largest premier Permian independent operator in the region.
For Q1 FY24, FANG’s board approved a base cash dividend of $0.90 per share plus a variable cash dividend of $1.07 per share. The combined dividend of $1.97 per share reflects a lucrative current yield of 4.11%.
Furthermore, the company repurchased stock worth $42 million in the first quarter and has roughly $1.6 billion outstanding under the current share buyback program.
In Q1, Diamondback’s adjusted EPS of $4.50 came in higher than the consensus of $4.47. Also, revenues of $2.23 billion rose 15.5% year-over-year and handily beat the consensus of $2.10 billion. Meanwhile, combined daily production volumes stood at 461.1 MBOED. For Q2 FY24, FANG expects total daily production volumes in the range of 459 to 466 MBOED.
Is Diamondback Energy a Good Stock?
With 13 Buys and one Hold rating on TipRanks, FANG stock has a Strong Buy consensus rating. The average Diamondback Energy price target of $229.77 implies 16.4% upside potential from current levels. In the past year, FANG shares have gained 55.2%.
Ending Thoughts
The energy sector is undergoing a huge wave of consolidation. While the demand for greener energy alternatives continues to grow, the need for oil and natural gas is here to stay. Traditional energy companies are also developing a greater focus on clean energy solutions and are expected to play a crucial role in the world’s decarbonization goals. The above three energy stocks can be considered for investment after thorough research.
