In this article, I have discussed three energy stocks, namely, ChampionX Corporation (CHX), NOW Inc. (DNOW), and Solaris Oilfield Infrastructure, Inc. (SOI), with significant potential to light up your portfolios.

In early 2023, oil market analysts were abuzz with predictions of a tightening global oil market in the latter half of the year. Given an anticipated rise in demand, coupled with expected supply constraints, oil could reach new heights in the second half of 2023.

The optimism was fueled by China’s economic recovery as it relaxed its COVID-19 restrictions. Further, supply cuts by top exporters such as Saudi Arabia and Russia to limit oil output in 2023 became the most influential factors shaping oil prices this year. Saudi Arabia’s production cut was recently extended into September, flagging the possibility of ‘deepening’ cuts.

In its latest monthly report, the International Energy Agency (IEA) highlighted that global oil demand is steadily climbing toward record highs. The combination of a robust summer for air travel and increased petrochemical activity in China is expected to drive oil demand to hit 102.2 million b/d in 2023.

Moreover, the global oilfield services market is expected to grow at a CAGR of 6.5% to reach a value of $427.60 billion by 2028.  Investors’ interest in energy stocks is evident from the Energy Select Sector SPDR® Fund ETF (XLE) 8.9% returns over the past three months.

To that end, let’s look at the fundamentally sound energy stocks you could consider to help boost your portfolio returns.

ChampionX Corporation (CHX)

CHX provides chemistry solutions, engineered equipment, and technologies worldwide to oil and gas companies. The company operates through four segments: Production Chemical Technologies; Production & Automation Technologies; Drilling Technologies; and Reservoir Chemical Technologies.

On July 28, CHX paid its shareholders a quarterly dividend of $0.085 per share on the company’s common stock. Its four-year average yield is 0.28%, while its annual dividend translates to a 0.96% yield on the current prices.

On April 26, ConocoPhillips recognized CHX in Norway with the 2022 Supplier Recognition Award (Focus in Execution), acknowledging its asset integrity program in the Greater Ekofisk area. The recognition exhibits CHX’s exceptional leadership in observance of ConocoPhillips’ SPIRIT values.

CHX’s trailing-12-month levered FCF margin of 14.80% is 142.8% higher than the 6.10% industry average. Likewise, its trailing-12-month asset turnover ratio of 1.14x compares to the industry average of 0.61x.

During the second quarter that ended June 30, 2023, CHX’s revenues amounted to $926.60 million, while its gross profit increased 33.2% year-over-year to $282.21 million. Its net income improved by 234.4% year-over-year to $96.63 million.

Furthermore, its adjusted EPS came in at $0.49, representing a 75% increase from the prior year quarter. CHX’s adjusted EBITDA stood at $186.24 million, up 34.7% year-over-year.

The consensus revenue estimate of $1.02 billion for the fiscal fourth quarter (ending December 2023) represents a 3.1% increase year-over-year. The consensus EPS estimate of $0.53 for the current quarter indicates a 24.3% improvement year-over-year.

The company has an excellent earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.

Over the past year, the stock has gained 56.9% to close the last trading session at $35.50.

CHX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has an A grade for Momentum and a B for Growth and Quality. Among the 47 stocks in the Energy - Services industry, it is ranked #6. Click here to see the other ratings of CHX for Value, Stability, and Sentiment.

NOW Inc. (DNOW)

DNOW is a worldwide supplier of downstream energy and industrial products for petroleum refining, chemical processing, LNG terminals, power generation utilities, and industrial manufacturing operations. It offers its products under the DistributionNOW and DNOW brand names.

DNOW’s trailing-12-month ROTC and ROTA of 12.08% and 9.65% are 77.2% and 91.1% higher than the industry averages of 6.81% and 5.05%, respectively. Also, its asset turnover ratio of 1.76x compares to the industry average of 0.81x.

For the second quarter that ended June 30, 2023, DNOW’s revenue increased 10.2% year-over-year to $594 million, and its operating profit grew 24.1% from the year-ago value to $36 million. The company’s non-GAAP EBITDA, excluding other costs, remained flat year-over-year at $47 million.

Net income attributable to DNOW excluding other costs increased 30.8% year-over-year to $34 million, while earnings per share attributable to DNOW stockholders excluding other costs stood at $0.31, up 34.8% year-over-year.

Analysts expect DNOW’s revenue to increase 10.1% year-over-year to $2.35 billion in the fiscal year ending December 2023. The company’s EPS for the current year is expected to grow 2.6% year-over-year to $0.98. Moreover, the company surpassed the consensus revenue estimates in all four trailing quarters, which is impressive.

Shares of DNOW have gained 14.6% over the past three months to close the last trading session at $11.08.

It’s no surprise that DNOW has an overall B rating, equating to Buy in our proprietary rating system. It also has an A grade for Value and Momentum and a B for Quality. It is ranked #7 out of 47 stocks in the same industry.

To access additional ratings for DNOW’s Growth, Stability, and Sentiment, click here.

Solaris Oilfield Infrastructure, Inc. (SOI)

SOI designs, manufactures, and sells mobile equipment to unload, store, and deliver proppant, water, and chemicals at oil and natural gas well sites. It is involved in the transloading and storing proppant or railcars at its trans-loading facility.

On August 15, the company declared a quarterly dividend of $0.11 per share of Class A common stock, payable to its shareholders on September 15, 2023. SOI’s four-year average dividend yield is 4.70%, and its current dividend of $0.44 translates to a 4.2% yield on the prevailing prices. Its dividend payout has increased at a marginal CAGR over the past three years.

SOI’s trailing-12-month CAPEX/Sales of 26.53% is 90.7% higher than the 13.91% industry average. Likewise, its trailing-12-month asset turnover ratio of 0.73x compares to the industry average of 0.61x.

SOI’s total revenue amounted to $77.20 million in the second quarter ended June 30, 2023, while its operating income increased 52.9% year-over-year to $15.78 million. The company’s net income grew 47.7% from the year-ago value to $12.24 million. Also, its adjusted EBITDA rose 27.3% from the prior-year quarter to $26.83 million. In addition, its EPS increased 50% year-over-year to $0.24.

Street expects SOI’s EPS for the fiscal year 2023 to increase 34.2% year-over-year to $1.02, while its revenue is expected to grow marginally from the prior year to $321.40 million. Moreover, it topped the EPS estimates in each of the trailing four quarters.

The stock has gained 27.1% over the past three months to close the last trading session at $10.51.

SOI’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.

It has an A grade for Momentum and a B for Sentiment. Within the same industry, it is ranked #10. Click here to see the other ratings of SOI for Growth, Value, Stability, and Quality.

What To Do Next?

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CHX shares were trading at $35.73 per share on Thursday afternoon, up $0.23 (+0.65%). Year-to-date, CHX has gained 24.29%, versus a 15.75% rise in the benchmark S&P 500 index during the same period.

Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.

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