The energy sector started picking up momentum in late 2020. And the sector ended the second quarter of 2021 as the S&P 500’s best performer with a staggering 45.6% gain. And this impressive momentum shows no signs of slowing.
West Texas Intermediate crude futures, the U.S. oil benchmark, crossed $80 per barrel last week for the first time since November 2014 amid heightened demand and tight supply. Natural gas prices are also at record-high levels, which is causing a greater demand for oil and fueling an already strong oil price rally. Analysts expect the supply deficit to continue, pushing the oil prices to even above $100 per barrel. Furthermore, the Department of Energy recently stated that it has no immediate plans to ease the price rally. The industry trends have lately been motivating investors to bet on energy stocks.
Because the price momentum is not expected to end anytime soon, we think red-hot small-cap energy stocks, CONSOL Energy Inc. (CEIX) and SilverBow Resources, Inc. (SBOW), which are currently trading above their respective 50-day and 200-day moving averages, could be solid bets now.
CONSOL Energy Inc. (CEIX)
CEIX in Canonsburg, Pa., produces and exports bituminous coal. Its flagship operation is the Pennsylvania Mining Complex, which can produce approximately 28.5 million tons of coal per year and comprises three large-scale underground mines: Bailey, Enlow Fork, and Harvey. CEIX also develops the Itmann Mine and the Greenfield reserves. The company has a $1.17 billion market capitalization.
CEIX reported 5.90 million tons of coal production for its fiscal second quarter, ended June 30, with a 154% rise in total coal revenue year-over-year to $259.83 million. Its total revenue increased 76.6% from the same period last year to $287.16 million. Its net cash provided by operating activities rose 2,104.4% year-over-year to $94.61 million. In addition, its cash and cash equivalents balance was $200.20 million, reflecting a506.2% increase year-over-year.
A $1.25 billion consensus revenue estimate for the current year indicates a 22.7% improvement from the last year. Analysts expect the company’s EPS to come in at $1.97 in the current year, indicating a 632.4% rise year-over-year.
Shares of CEIX have gained substantially over the past year and year-to-date. The stock is currently trading above its 50-day and 200-day moving averages, indicating an overall uptrend.
It is no surprise that CEIX has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock also has an A grade for Momentum, and a grade B for Growth and Quality. Among the 11 stocks in the A-rated Coal industry, CEIX is ranked #3. Click here to view additional CEIX ratings for Value, Sentiment, and Stability.
SilverBow Resources, Inc. (SBOW)
With a $376.04 million market capitalization, SBOW operates as an oil and gas company. SBOW acquires and develops assets mainly in the Eagle Ford shale located in South Texas. It is based in Houston, Tex.
On October 4, SBOW announced the acquisition of oil and gas assets in the Eagle Ford. The acquisition should bolster SBOW’s position in the industry and improve its financials.
The company’s net sales increased 181.2% year-over-year to $69.86 million in its fiscal second quarter, ended June 30. Its operating income grew 112.6% from its year-ago value to $33.54 million. Furthermore, the company’s adjusted EBITDA improved 64.7% year-over-year to $42.79 million.
The Street expects SBOW’s revenues to increase 64.6% year-over-year to $88 million in the current quarter, ending December 2021. The company’s EPS is expected to increase 144.7% year-over-year to $3.23 in the current quarter. Furthermore, SBOW surpassed the Street’s EPS estimates in three out of the trailing four quarters, which is impressive.
SBOW has gained more than 500% in price over the past year. The stock is currently trading well above its 50-day and 200-day moving averages, indicating an overall uptrend.
SBOW’s solid growth prospects are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system.
SBOW has an A grade for Growth and Momentum, and B for Value, Sentiment, and Quality. It is ranked #1 of the 89 stocks in the Energy - Oil & Gas industry. To see POWR Rating for Stability and additional details, click here.
Note that SBOW is one of the few stocks handpicked by our Chief Value Strategist, David Cohne, currently in the POWR Value portfolio. Learn more here.
CEIX shares were trading at $32.80 per share on Thursday morning, down $0.74 (-2.21%). Year-to-date, CEIX has gained 354.92%, versus a 19.22% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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