2 Strong Buy Energy Stocks for August 2024

The energy sector has seen an extraordinary turnaround, driven by a confluence of factors including the post-pandemic recovery and geopolitical tensions. The combination of reduced investment during the pandemic and the Russia-Ukraine conflict has created a supply-demand imbalance, driving oil and gas prices to new highs.

Moreover, U.S. oil production is forecast to reach new records, with significant increases in the Permian Basin.

With West Texas Intermediate crude oil trading at around $77 a barrel and natural gas prices recently surging due to forecasted extreme heat, now is a good time for investors to consider investing in energy stocks.

In this context, Finbold analyzed current trends and identified two energy stocks with strong buy ratings for the coming months. These stocks are poised to benefit from solid market fundamentals and growing demand in the energy sector.

Schlumberger Limited (NYSE: SLB)

Schlumberger Limited (NYSE: SLB) is a global leader in petroleum services, providing technology for reservoir characterization, drilling, production and processing in more than 120 countries.

Despite the stock falling more than 6% year-over-year, revenue in Q1 2024 rose 13% year-over-year to $8.71 billion, driven by an 18% increase in international markets despite a 6% decline in North America.

The Permian Basin is expected to be a key growth driver, with production set to reach a record 6.4 million barrels per day by the end of 2024, up from 6.1 million in 2023. This growth is being driven by increased drilling efficiency and a stable rig count in the region.

Schlumberger’s forward P/E of 15.9x, slightly above the sector median of 12.18x, is justified by the company’s industry leadership, technological advantage and strong market presence.

According to sources, UBS reaffirmed a buy rating and a $67 price target on the stock after Q2 2024 earnings beat expectations, reaching adjusted earnings per share of $0.85 and an EBITDA margin of 25%.

The company’s planned acquisition of ChampionX for $7.8 billion is expected to expand its manufacturing and intervention solutions offering, generating annual pre-tax savings of $400 million over the three years following the close of the transaction.

In addition, Schlumberger offers a dividend yield of 2.26%, reflecting its commitment to returning value to shareholders. With solid financial results and positive growth prospects, Schlumberger presents an attractive investment opportunity.

Wall Street analysts are forecasting an average price target of $66, with a high forecast of $81, which implies a potential upside of 37.61% from the current price of $48.33 and gives the company a Strong Buy rating.

Shell plc (NYSE: SHEL)

Shell plc (NYSE: SHEL), a UK-based global energy leader, is known for its strategic partnerships and solid financial performance.

Currently trading at 14 times dividend yield of 3.69%, Shell shares are up 16% over the past year. The company increased its quarterly dividend by 4% and launched a new share buyback program worth $3.5 billion.

Second-quarter results, due Aug. 1, call for earnings of $1.82 per share on revenue of $88.6 billion.

Shell reported earnings of $2.38 per ad share in the previous quarter, beating estimates despite lower-than-expected revenue due to falling natural gas prices.

In the second quarter, Shell is forecasting a $2 billion impairment due to the shutdown of its Rotterdam biofuels plant and the sale of its Singapore refinery. The renewables and energy solutions segment is expected to post a loss of $500 million to a $100 million gain.

Wall Street analysts are forecasting an average 12-month price target of $84.30, with a high forecast of $90, which would imply a 17 percent increase from the current price of $72.05, with a strong buy rating.

With solid earnings, strong shareholder returns and strategic growth initiatives, Shell is well positioned to continue its success, making it an attractive investment for investors seeking exposure to the energy sector.

For investors and traders interested in taking advantage of the energy sector recovery, Schlumberger and Shell offer attractive opportunities.

With global energy demand continuing to grow, these two stocks are well-positioned to generate significant returns, making them a worthwhile addition to any investment portfolio.

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