The demand for portable generator fuel tanks is significant in the United States, driven by the necessity for a dependable and uninterrupted power source. Therefore, I think investors could buy gas stocks Cheniere Energy Partners, L.P. (CQP), Sunoco LP (SUN), and Star Group, L.P. (SGU) this summer.
The growing demand for cleaner energy sources and the use of natural gas to generate electricity, heat buildings, heat water, drive industrial furnaces, etc., as well as the need to reduce carbon emissions and subsidies provided by governments for using natural gas, are driving the market’s growth.
As per Mordor Intelligence, the US natural gas market is projected to register a CAGR of over 5% until 2028.
Moreover, natural gas has a lower cost than other fossil fuels, which makes gas-generating systems an economically sensible choice for producing electricity. Additionally, technological developments have increased the effectiveness of gas generators.
As technology continues to progress, fuel consumption and operating costs should decrease over time, further increasing demand. The gas-generating systems industry in the United States is expected to experience a robust CAGR of 9.3%, reaching $3.80 billion in 2023.
Take a look at the stocks mentioned above:
Cheniere Energy Partners, L.P. (CQP)
CQP provides Liquefied Natural Gas (LNG) to integrated energy companies, utilities, and energy trading companies worldwide. Its regasification facilities have approximately 17 billion cubic feet of LNG storage space, along with a 94-mile pipeline that interconnects the Sabine Pass LNG terminal with various interstate pipelines.
CQP’s trailing-12-month net income margin and levered FCF margin of 25.45% and 16.40% are 65.7% and 177.6% higher than the respective industry averages of 15.36% and 5.91%.
On June 6, 2023, CQP announced that it had priced its previously announced offering of Senior Notes due 2033. The CQP 2033 Notes will bear interest at a rate of 5.95% per annum and have matured on June 30, 2033.
CQP intends to contribute the proceeds from the offering to its subsidiary, Sabine Pass Liquefaction, LLC, to be used to redeem a portion of the outstanding aggregate principal amount of its senior secured notes due 2024.
Its annual dividend of $3.10 per share translates to a 6.68% yield on prevailing prices. Its four-year average dividend yield is 6.90%. The company’s dividend payouts have increased at a 7.4% CAGR over the past three years and an 11.1% CAGR over the past five years. The company has raised its dividend payout for the past six years consecutively.
During the fiscal first quarter that ended March 31, 2023, CQP reported total revenues of $2.92 billion. Its total operating costs and expenses declined 73.4% from the year-ago quarter to $788 million. Thus, its income from operation rose 488.1% year-over-year to $2.13 billion.
In addition, its net income grew significantly from the previous-year quarter to $1.94 billion, and net income per common unit came in at $3.50, compared to $0.11 in the year-ago quarter.
CQP’s EPS and revenue for the fiscal second quarter that ended June 2023 are expected to come at $1.05 and $2.31 billion, respectively. Moreover, CQP topped consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
The stock has gained 14.5% over the past year to close its last trading session at $47.18.
CQP’s POWR Ratings reflect its robust outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
CQP has a B grade for Growth, Value, Momentum, Stability, and Quality. Among the 26 stocks in the A-rated MLPs – Oil & Gas industry, it is ranked first.
Click here for additional CQP grade for Sentiment.
Sunoco LP (SUN)
SUN is a distributor and retailer of motor fuels in the United States. The company operates through the two broad segments of Fuel Distribution and Marketing, purchasing motor fuels from independent refiners and oil companies and supplying to independent dealer stations; and All Other.
SUN’s trailing-12-month asset turnover ratio of 3.90 is 503.9% higher than the industry average of 0.65. Its trailing-12-month ROCE of 33.02% is 38.9% higher than the 23.77% industry average.
On May 1, SUN completed the acquisition of 16 refined product terminals located across the East Coast and Midwest from Zenith Energy for $110 million. The partnership expects the acquisition to be accretive to unitholders in the first year of ownership.
While SUN has a four-year average dividend yield of 9.93%, it pays $3.37 in dividends annually, which translates to a dividend yield of 7.74% on the prevailing price level.
In the fiscal first quarter ended March 31, 2023, SUN’s total revenues increased 94% year-over-year to $5.36 billion. Its adjusted EBITDA rose 15.7% year-over-year to $221 million. Moreover, the company reported a net income of $141 million or $1.41 per common unit.
The consensus EPS estimate of $1.27 for the fiscal second quarter that ended June 2023 reflects a rise of 6% from the prior-year quarter. The company has exceeded the consensus revenue estimates in each of the trailing-four quarters.
Over the past year, shares of SUN have gained 21% to close its last trading session at $43.89.
SUN’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
The stock has a grade B for Value, Momentum, Sentiment, and Stability. It is ranked #6 in the same industry.
In addition to the ones we’ve stated above, one can access SUN’s ratings for Growth and Quality here.
Star Group, L.P. (SGU)
SGU is a service energy provider to residential and commercial customers. The company sells diesel, gasoline, and home heating oil on a delivery-only basis and plumbing services. It also installs, maintains, and repairs heating and air conditioning equipment.
SUN’s trailing-12-month asset turnover ratio of 2.02x is 742.4% higher than the industry average of 0.24.
SGU pays $0.65 in dividends annually, which translates to a dividend yield of 4.98% on the market price. It has a four-year average dividend yield of 5.47%. The company’s dividend has grown at a CAGR of 6.9% over the past five years. The company has raised its dividend payout for the past ten years consecutively.
SGU’s total sales for the half year that ended March 31, 2023, increased 9% year-over-year to $1.39 billion. Its net income amounted to $75.58 million or $1.74 per share. The company reported an operating income of $115.12 million.
SGU has gained 60.3% over the past nine months to close its last trading session at $13.24.
It’s no surprise that SGU has an overall B rating, which equates to a Buy in our POWR Ratings system.
The stock has an A grade for Quality and a B for Value, Momentum, and Sentiment. SGU is ranked #4 in the same industry.
Click here to see the additional ratings for SGU’s Growth and Stability.
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43 year investment veteran Steve Reitmeister shares his updated stock market outlook & top picks for the rest of 2023. Spoiler Alert: Steve still believes bear case most likely.
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CQP shares fell $47.18 (-100.00%) in premarket trading Wednesday. Year-to-date, CQP has declined -12.54%, versus a 17.39% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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