New Trade for January 12th, 2021

Investors are cautious this morning after yesterday’s dip.  The Dow Closed 89 points lower in yesterday’s session and appears to be looking to trim gains this morning after logging a record close on Friday. 

Energy was the strongest sector yesterday, as indicated by the 1.5% surge for the S&P 500 Energy Sector SPDR Fund (XLE).  It seems oil and gas companies are on the mend after a horrific 2020, today our trade alert highlights one of the best energy companies to invest in for a bounceback in 2021.  

Pioneer Natural Resources Company (PXD) has long viewed sustainability as a balance of economic growth, environmental stewardship, and social responsibility. Its emphasis is on developing natural resources in a manner that protects surrounding communities and preserves the environment. This has helped the stock gain 63.5% over the past nine months. 

After the battered energy sector got cheap enough to spark buying activity, we witnessed a spate of mergers and acquisitions among the lower tier of the industry. PXD was among the firms shopping around, reaching an agreement to buy fellow Permian Basin producer Parsley Energy (PE) for $4.5 billion.

If you’re wondering how PXD managed to finance that transaction, the answer lies in the fact that it was an all-stock deal – not great for existing shareholders, but it did ensure Pioneer didn’t have a new giant debt load hanging over its head. Meanwhile, it can gain efficiencies that come from a merger of this size.

And the fact that Parsley operated primarily in the same region of West Texas, where Pioneer has both expertise and existing staff, sweetens the deal given the potential for significant cost-savings over time.

That deal was a coup for Pioneer shareholders, built on the fact it was large and well-capitalized at a time when stressed and debt-reliant shale plays were looking for a white knight in what is decidedly a buyer’s market. On top of that acquisition, PXD also boosted its dividend by 25% at the start of the year as further evidence of its strong balance sheet.

While some smaller energy firms are clearly hurting, Pioneer hasn’t wasted the crisis and continues to consolidate market share as it looks to the future.  Despite gaining more than 35% over the past six months, PXD has the potential to grow further based on its continued business growth, and favorable earnings and revenue outlook.

Analyst sentiment, which gives a good sense of a stock’s future price movement, is good  for PXD. An average broker rating of 1.33 indicates a favorable analyst sentiment. Of 20 Wall Street Analysts that rated the stock, 18 rated it “Strong Buy”, there is 1 “Buy” rating and 1 “Hold” rating.

Analysts expect PXD’s revenues to rise 21% year-over-year to $1.32 billion in the current quarter ending March 31, 2021. The consensus EPS estimate $1.25 for the current quarter indicates an 8.7% rise from the year-ago value. The company has an impressive earnings surprise history; it beat the Street EPS estimates in three  of the trailing four quarters. This outlook should keep PXD’s price momentum alive in the near term.

Investors and prospective investors will want to tune in later this week.  PXD announced yesterday its fourth quarter 2020 earnings news release is scheduled to be issued after the close of trading on the New York Stock Exchange on Wednesday, February 17, 2021.

A conference call is scheduled for Thursday, February 18, 2021, at 9:00 a.m. Central Time to discuss the fourth quarter results.

To listen to the call and view the accompanying presentation — visit Select “Investors” then “Earnings & Webcasts.”

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