It’s been a banner year for energy stocks. With oil prices cresting above $120 a barrel and continuing to trade in a range between $85 and $105, energy companies are reaping record profits and issuing incredible earnings.
Many energy companies have announced net income that is up more than 3,000% from year-earlier levels. It all amounts to a windfall for an industry that was decimated during the pandemic when oil prices finished 2020 below $50 per barrel.
The strong earnings have led to outperformance among energy stocks this year, with many share prices up 25%, 50%, even 100%. Oil stocks have been the lone bright spot in an otherwise dismal year for equities.
While some analysts continue to debate whether oil prices have peaked, the consensus view is that the earnings of oil companies will remain strong through the remainder of this year. With that in mind, here are seven energy stocks primed for a Q3 earnings gusher.
Pioneer Natural Resources
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For this year’s second quarter, ExxonMobil (NYSE:XOM) reported that its revenues rose 69% year-over-year to $111.99 billion.
Net income earned in the April through June period amounted to a record $17.85 billion, a 281% increase from a year ago.
Its Q2 earnings per share came in at $4.21, a 283% annualized growth rate. Given that oil prices remain around $85 a barrel, chances are good ExxonMobil can do it again when it reports earnings for the third quarter on Nov. 4.
Owing to its strong financial performance and bullish outlook, XOM stock has been ripping higher this year, having gained 46% to reach $92.72 per share. ExxonMobil also pays a hefty quarterly dividend that yields 3.79%, for a payout of $0.88 a share.
The company has also impressed investors with its plan to buy back $30 billion of its own stock this year and next. If all this weren’t enough, ExxonMobil is also cutting costs, planning to save $9 billion in annual expenses by 2023.
As a result, the company has lowered its break-even oil price to $41 a barrel. So if oil prices remain above $80 per barrel for an extended time, it should lead to a continued windfall at ExxonMobil.
Occidental Petroleum (OXY)
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There continues to be speculation in the media that Buffett’s holding company, Berkshire Hathaway (NYSE:BRK-B), may eventually buy 100% of Occidental Petroleum. Buffett has secured regulatory approval to purchase up to 50% of OXY stock should he choose to do so.
With oil prices elevated, OXY stock has been one of the energy stocks that is on fire this year, rising more than 100% since January. The stock has been one of the top performers in the S&P 500 index year to date. OXY has also gotten a lift from strong earnings prints.
For this year’s second quarter, Occidental Petroleum reported $10.68 billion in revenue, a 79% increase from a year earlier. The company’s net income came in at $3.76 billion, an incredible year-over-year increase of 3,546%. Earnings per share of $3.47 were up an annualized 3,570%.
No wonder the Oracle of Omaha loves this stock.
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Chevron (NYSE:CVX) has also seen its earnings take off this year as oil prices hovered around $100 per barrel.
The company reported that its second-quarter profit more than tripled from the same period in 2021, reaching $11.6 billion as its revenue grew to $65 billion, compared with $36 billion a year earlier.
The Q2 results translated into earnings per share of $5.95, a 272% increase from a year ago. The stellar earnings enabled Chevron to hike its share repurchase program, announcing that it will buy back up to$15 billion of its own stock.
Chevron’s strong earnings were driven by April through June sales numbers. For that period, a barrel of crude oil and natural gas liquids averaged $89, up 65% from a year ago.
While CVX stock hasn’t enjoyed as big a run this year as OXY stock, it has managed to gain around 30% since January.
The stock’s price-to-earnings ratio of 10.38 makes it undervalued relative to its peers. Its 3.66% quarterly dividend yield also is enticing. Perhaps unsurprisingly, Chevron is the only other of the energy stocks that Warren Buffett has been buying this year.
Devon Energy (DVN)
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Devon Energy (NYSE:DVN) is another of the energy stocks that can be expected to gush cash at its next earnings release.
In the second quarter, the company reported $5.58 billion in revenue, which was up 79% from a year ago. Its net income of $1.93 billion and earnings per share of $2.93 were each up more than 650% year over year, while its operating income of $2.56 billion rose an annualized 702%.
The exceptionally strong print has helped DVN stock gain around 40% so far this year. With oil prices continuing to float above $85 a barrel, Devon Energy can be expected to again announce strong earnings for this year’s third quarter.
In addition to the strong balance sheet, investors also like that Devon Energy pays one of the best quarterly dividends around, currently yielding 7.22%.
However, Devon Energy’s stock actually has an annualized yield of more than 10% because it is a fixed-plus-variable dividend. This means that the base dividend is supplemented by a variable dividend payment of up to 50% of the company’s free cash flow.
Currently, Devon Energy has one of the most lucrative dividends among companies listed on the S&P 500 index. The company’s price-to-earnings ratio is a low 8.19.
Pioneer Natural Resources (PXD)
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Pioneer Natural Resources (NYSE:PXD) stock has gained 23% this year and currently trades at $230 a share. However, PXD stock is presently 20% below its 52-week high, presenting a “buy the dip” opportunity to savvy investors.
It would certainly be smart to buy shares before the company’s Q3 earnings are announced. In the second quarter, Pioneer reported that its revenue rose 64% year-over-year to $7.01 billion. Net income of $2.37 billion was up 524% from the second quarter of 2021, and earnings per share of $9.31 were up an annualized 505%.
Other reasons to be bullish on PXD stock heading into earnings include a P/E ratio of 9.54 and a hybrid dividend that yields 11.03%.
The company is also the largest land owner in Texas’ oil-rich Permian Basin and has announced plans to buyback $1 billion of its own stock. Not too shabby.
Over the past 12 months, Pioneer Resources’ stock has increased 55%, buoyed by strong oil and natural gas prices and equally strong financial results.
Kinder Morgan (KMI)
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Kinder Morgan (NYSE:KMI) is a bit different than the other names on this list in that it focuses on oil and gas pipelines.
Today, 40% of U.S. natural gas volumes and 50% of all U.S. gas that is exported to foreign jurisdictions travels through Kinder Morgan’s network of 83,000 miles of pipelines and terminals.
Business for Kinder Morgan has been gangbusters this year as would be expected. Consequently, KMI stock is up more than 8% over the past 12 months.
For the second quarter that runs from April through June, Kinder Morgan reported revenues of $5.15 billion, an increase of 64% from the same time frame in 2021.
The company’s net income totaled $635 million in Q2, a 184% year-over-year gain. Investors have responded positively to the numbers and its 6.22% quarterly dividend. In addition to the pipelines it operates, Kinder Morgan has announced plans to diversify and expand into renewable natural gas going forward.
Marathon Oil (MRO)
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So far this year, Marathon Oil (NYSE:MRO) stock is up nearly 50%. It pays only a 1.25% dividend, but its earnings have been expanding at a fast clip this year.
In this year’s second quarter, Marathon Oil reported revenue of $2.18 billion, up 73% from a year earlier. However, the company’s net income posted a mind-boggling annualized growth of 5,938%. Equally impressive was Marathon’s earnings per share of $1.37, which was up 6,750% from Q2 2021. The company’s profit margin was 44%, which is up 3,390% year over year.
While it might seem hard to imagine that Marathon Oil can replicate its earnings success in Q3, indications are that the company will again outperform expectations.
Analysts at Piper Sandler (NYSE:PIPR) lifted their price target on MRO stock to $41.00 and issued an “overweight” rating on the shares. If Piper Sandler’s forecast proves to be accurate, it would represent a 64% increase in Marathon Oil’s share price in the coming 12 months.
On the date of publication, Joel Baglole 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.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.