Oil prices have been volatile in recent weeks, soaring to record highs earlier this month but then tumbling to below $100 last week. However, prices rebounded later that week, surpassing that mark. Moreover, on Monday, oil prices moved higher after Russia-Ukraine talks appeared to yield no sign of progress, and markets remained anxious over tight supply. The international benchmark Brent crude climbed above $111 a barrel, while U.S. futures at $108.25.
Additionally, the U.S. Energy Information Administration sees crude oil prices higher than $100 per barrel in the coming months. The United States, the United Kingdom, and the European Union have announced new limits on energy imports from Russia lately, and several international oil companies have announced plans to stop their operations in Russia and end partnerships with Russian firms, which could lead to upward pressure on oil prices. On the other hand, according to OPEC+ latest report, some producers are still falling short of their supply quotas.
Given the tight supply outlook, the oil prices are likely to remain elevated, boding well for energy companies. Thus, Wall Street’s favorites stocks which are currently trading under $10, Energy Transfer LP (ET), Crescent Point Energy Corp. (CPG), TechnipFMC plc (FTI), and Tellurian Inc. (TELL), could be ideal additions to your watchlist now.
Energy Transfer LP (ET)
ET owns and operates a portfolio of energy assets in the United States. Its business segments include Intrastate Transportation and Storage; Interstate Transportation and Storage; Midstream; NGL and Refined Products Transportation and Services; Crude Oil Transportation and Services; Investment in Sunoco LP; Investment in USA Compression Partners; LP (USAC); and All Other Segments.
This month, ET announced a definitive agreement to sell its 51% interest in Energy Transfer Canada ULC (Energy Transfer Canada) to a joint venture that is expected to close by the third quarter of 2022. This transaction is expected to result in cash proceeds to ET of approximately C$340 million (US$270 million) and also help the company redeploy capital within its core footprint in the U.S.
Earlier in December, ET announced the completion of its merger with Oklahoma City-based Enable Midstream Partners, LP (ENBL). Their combined operations are expected to generate annual run-rate cost and efficiency synergies of more than $100 million.
ET’s revenue increased 85.9% year-over-year to $18.66 billion in the fiscal fourth quarter ended December 31, 2021. Its operating income grew 26.1% from the year-ago value to $1.69 billion, while its net income improved 47.8% year-over-year to $1.23 billion. Its net income per limited partner unit increased 52.6% from its year-ago value to $0.29.
Analysts expect ET’s revenue for the current quarter to grow 10.2% from the same period last year to $18.73 billion. Also, for the fiscal second-quarter ending June 2022, revenues are expected to come in at $19.27 billion, indicating a 27.6% year-over-year growth. The company’s EPS is expected to increase 64.5% year-over-year to $0.33 for the same quarter.
ET’s shares have gained 22.7% over the past year and 19% year-to-date to close the last trading session at $9.79.
All the 8 Wall Street analysts that rated ET have rated it Buy. The 12-month median price target of $13.88 indicates a 41.8% potential upside. The price targets range from a low of $12.00 to a high of $15.00.
Crescent Point Energy Corp. (CPG)
CPG is a Canada-based company exploring, developing, and producing light and medium crude oil, natural gas liquids, and natural gas reserves in Western Canada and the United States.
In December 2021, CPG declared a first-quarter 2022 dividend of $0.045 per share payable on April 1, 2022, to shareholders of record on March 15, 2022, which represents a 50% increase from its fourth-quarter 2021 dividend, equating to a dividend payment of $0.18 per share on an annualized basis. The company also announced its plans to allocate up to $100 million to share repurchases over the following six months. Thus, improving shareholders’ returns considerably.
For the fiscal fourth quarter ended December 31, 2021, CPG’s oil and gas sales increased 101.1% year-over-year to $900.40 million. Its net income grew 337.5% from the year-ago value to $121.60 million in the same period. Also, its adjusted net earnings from operations stood at $160 million, reflecting an 86.9% increase year-over-year. The company’s net income per share came in at $0.21, up 310% from the previous year’s quarter.
CPG’s revenue for the current quarter is expected to come in at $847.35 million, indicating a 63.1% year-over-year growth. The company’s EPS is expected to increase 903.7% year-over-year to $0.33 for the ongoing ending March 2022.
The stock has gained 66% over the past year to close the last trading session at $6.97. CPG shares have gained 30.5% year-to-date.
Among the 8 Wall Street analysts who have rated CPG, six rated it Buy, and two rated it Hold. The 12-month median price target of $10.20 indicates a 46.3% potential upside. The price targets range from a low of $7.94 to a high of $12.31.
TechnipFMC plc (FTI)
FTI is a global energy service company that provides technology to the traditional and energy industry. The company operates across two business segments: Subsea; and Surface Technologies.
In January 2022, FTI was awarded a large (between $500 million and $1 billion) subsea Engineering, Procurement, Construction, and Installation (EPCI) contract by Petrobras for its Búzios 6 field (module 7), greenfield development in the pre-salt area. The contract covers flexible and rigid pipes, umbilicals, pipeline end terminals, rigid jumpers, umbilical termination assemblies, and a mooring system. This demonstrates the continuing strength of the subsea market and should add substantially to the company’s top line growth.
Also, in the same month, FTI and Magnora ASA (Magnora) announced that their partnership, Magnora Offshore Wind AS, has been offered the opportunity to enter into an Option Agreement for the N3 area by the Crown Estate Scotland in the ScotWind leasing round. The development will have a total capacity of approximately 500 megawatts (MW). The companies are expected to significantly cash in on the growing offshore wind business, leveraging their respective expertise and experience.
Net income attributable to FTI for the fiscal year ended December 31, 2021, increased 100.4% from the prior year to $13.30 million, while earnings per share attributable to FTI came in at $0.03, reflecting an increase of 100.4% year-over-year. In addition, cash, cash equivalents of continuing operations stood at $1.33 billion, up 4.6% year-over-year.
The consensus revenue estimate of $6.61 billion for the fiscal year ending December 2022 represents a 3.3% increase from the prior year. Also, its EPS is expected to come in at $0.21 in the same period.
The stock has gained 23.3% year-to-date. Over the past month, the stock has gained 12.8% to close the last trading session at $7.30.
Of the 8 Wall Street analysts that have rated FTI, five rated it Buy, and three rated it Hold. The 12-month median price target of $10.51 indicates a 44% potential upside. The price targets range from a low of $7.80 to a high of $13.00.
Tellurian Inc. (TELL)
TELL is engaged in developing a portfolio of natural gas production, liquefied natural gas (LNG) marketing, and infrastructure assets worldwide.
TELL’s total revenue increased 90.4% from the prior year to $71.28 million in the fiscal year ended December 2021. Also, its net cash provided by financing activities for the same period came in at $344.96 million, reflecting an increase of 308.1% year-over-year, while its cash, cash equivalents, and restricted cash stood at $307.27 million, up 275.9% year-over-year.
Street expects TELL’s revenue for the current quarter ending March 2022 to come in at $41.11 million, indicating an increase of 372.2% year-over-year. Its EPS is expected to grow 75% year-over-year in the same period.
TELL’s shares have gained 48.9% over the past year and 27.6% year-to-date to close the last trading session at $3.93.
The Wall Street analysts that have rated the stock have rated it Buy. The 12-month median price target of $7.00 indicates a 77.2% potential upside. The price targets range from a low of $6.00 to a high of $8.00.
Article 17:
Author: Sweta Vijayan
Date: 03/21/2022
General Motors vs. Stellantis: Which Auto Manufacturing Stock is a Better Buy?
Primary Ticker: General Motors Company(NYSE:GM)
Secondary Ticker: STLA
Teaser: The rising oil and metal prices and deepening supply chain disruptions worldwide due to the ongoing Russia-Ukraine war have been affecting auto manufacturers lately. However, government and corporate investments to boost electric vehicle manufacturing and rising demand should drive the industry’s growth. Therefore, prominent players in this space, General Motors (GM) and Stellantis (STLA) should benefit. But which of these stocks is a better buy now? Read more to find out.
General Motors Company (GM) and Stellantis N.V. (STLA) are two prominent players in the global auto manufacturing industry. GM designs, manufactures, and sells cars, trucks, crossover vehicles, and related automobile parts to dealers for consumer retail sales and fleet customers, including daily rental car companies, commercial fleet customers, leasing companies, and governments worldwide. It also offers vehicle protection, maintenance, satellite radio, and automotive financing services. Netherlands-based STLA designs, manufactures, and sells passenger vehicles, pickup trucks, SUVs, and light commercial vehicles worldwide. It also produces metallurgical products and production systems for the automobile industry and provides retail and dealer financing, leasing, and rental services.
A surge in oil and metal prices and deepening supply chain disruptions due to the ongoing Russia-Ukraine war led to the auto manufacturing industry losing momentum lately. However, automakers investing hugely in developing electric and autonomous vehicles over the years are well-positioned to capitalize on rising demand and favorable government policies.
Moreover, government investments to ramp up chip production and the significant funding from the Bipartisan Infrastructure Bill for the EV industry are expected to facilitate the auto industry’s growth. Investors’ optimism in this space is evident from the Global X Autonomous & Electric Vehicles ETF’s (DRIV) 8.2% returns over the past week versus the SPDR S&P 500 ETF’s (SPY) 6.2% gains. So, both GM and STLA should benefit.
STLA is a winner with 11.7% gains over the past week versus GM’s 8% gains. But which of these stocks is a better pick now? Let’s find out.
Latest Developments
On March 8, 2022, GM and Pacific Gas and Electric Company (PG&E) announced their collaboration to pilot the use of GM electric vehicles as on-demand power sources for homes in PG&E’s service area. PG&E and GM will test vehicles with cutting-edge bidirectional charging technology that can help safely power the essential needs of a properly equipped home. This further expands GM’s electrification strategy, and it will have more than 1 million units of EV capacity in North America to respond to growing demand by 2025.
On January 24, 2022, STLA announced a series of global, multi-year agreements with Amazon.com, Inc. (AMZN) that will deploy AMZN’s technology and software expertise across the STLA organization and help accelerate its shift to becoming a sustainable mobility tech company. The companies will create a suite of software-based products and services for STLA’s new digital cabin platform, STLA SmartCockpit, starting in 2024 and deliver an enhanced digital customer experience to customers.
Recent Financial Results
GM’s net sales and revenues for its fiscal 2021 fourth quarter ended December 31, 2021, decreased 10.5% year-over-year to $33.58 billion. The company’s adjusted net income came in at $1.99 billion, down 29.1% from the year-ago period. Its adjusted EPS decreased 30.1% year-over-year to $1.35. As of December 31, 2021, the company had $20.07 billion in cash and cash equivalents.
For its fiscal 2021 full-year ended December 31, 2021, STLA’s net revenues increased 213.5% year-over-year to €149.42 billion ($164.93 billion). The company’s operating income came in at €15.13 billion ($16.70 billion), representing a 402.5% rise from the prior-year period. Its pre-tax profit came in at €14.39 billion ($15.89 billion), up 393.6% from the prior-year period. STLA’s net profit came in at €14.21 billion ($15.68 billion), indicating a 602.3% year-over-year improvement. Its EPS increased 236.6% year-over-year to €4.51. The company had €49.63 billion ($54.78 billion) in cash and cash equivalents as of December 31, 2021.
Past and Expected Financial Performance
GM’s net income, tangible book value, and total assets have increased at CAGRs of 7.7%, 18%, and 2.5%, respectively, over the past three years.
GM’s revenue is expected to grow 23.3% year-over-year in fiscal 2022, ending December 31, 2022, and 6.7% in fiscal 2023.
STLA’s net income, tangible book value, and total assets have increased at CAGRs of 71.3%, 29.8%, and 40.5%, respectively, over the past three years.
Analysts expect STLA’s EPS to improve 7.2% year-over-year in fiscal 2022, ending December 31, 2022, and 6.7% in fiscal 2023.
Valuation
In terms of non-GAAP forward PEG, GM is currently trading at 0.39x, 333.3% higher than STLA’s 0.09x. In terms of forward EV/EBITDA, STLA’s 1.21x compares with GM’s 6.13x.
Profitability
STLA’s trailing-12-month revenue is almost 1.3 times GM’s. STLA is also more profitable, with a 14.2% levered free cash flow margin versus GM’s negative value.
Furthermore, STLA’s ROE, ROA, and ROTC of 33%, 8%, and 15.5% compare with GM’s 17.2%, 3%, and 4.2%, respectively.
POWR Ratings
While STLA has an overall B grade, which translates to Buy in our proprietary POWR Ratings system, GM has an overall C grade, equating to Neutral. The POWR Ratings are calculated by considering 118 distinct factors, each weighted to an optimal degree.
STLA has an A grade for Value, consistent with its lower-than-industry valuation ratios. STLA’s 1.61x forward EV/EBIT is 86.9% lower than the 12.26x industry average. However, GM’s B grade for Value is in sync with its relatively lower valuation ratios. The company has an 11.24x forward EV/EBIT, 8.3% lower than the industry average of 12.26x.
STLA has a B grade for Quality, in sync with its higher-than-industry profitability ratios. STLA’s trailing-12-month EBIT margin of 10.6% is 12.6% higher than the 9.4% industry average. GM’s C grade for Quality reflects its slightly lower profit margin. GM has a 9% trailing-12-month EBIT margin, 4.4% lower than the industry average of 9.4%.
Of the 68 stocks in the Auto & Vehicle Manufacturers industry, STLA is ranked #2, while GM is ranked #35.
Beyond what we have stated above, our POWR Ratings system has also rated GM and STLA for Stability, Sentiment, Growth, and Momentum. Get all GM ratings here. Also, click here to see the additional POWR Ratings for STLA.
The Winner
Given the growing interest and rising investment in the electric vehicle industry, both GM and STLA are well-positioned to benefit. However, better financials, lower valuation, and higher profitability make STLA a better buy here.
Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to access the top-rated stocks in the Auto & Vehicle Manufacturers industry.
ET shares rose $0.09 (+0.91%) in premarket trading Tuesday. Year-to-date, ET has gained 23.62%, versus a -6.21% 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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