Stocks were in limbo as Wall Street awaited potentially pivotal comments from the Federal Reserve. Federal Reserve Chairman Jerome Powell is expected to address the press at 2:30 this afternoon. While the central bank is not expected to make any policy moves, it may signal to the market that it’s considering changing its bond buying policy.
Oil prices have been inching higher as crude inventories dwindle amid rising demand for energy. The American Petroleum Institute reported a loss of 8.5 million barrels in May, exceeding analyst forecast. As the global economic recovery drives a revival of industrial activities and mobility, demand will likely continue to rise.
“Demand growth is outpacing supply and will continue to do so over the coming months,” Said Stephen Brennock of oil broker PVM.
Based on the strengthening demand outlook, analysts expect oil prices to hit $80 a barrel or more this summer. Simultaneously, several large operators are reducing supply or rebranding to focus on renewable energy. ExxonMobil Corp. (XOM) lost a proxy fight to activist hedge fund that will force it to reduce production. Royal Dutch Shell (RDS.A) is considering selling off American oil fields. This creates a huge opportunity in select energy stocks, like the one featured in today’s trade alert. Read on to find out what sets this oil producer apart from its peers.
Headquartered in Calgary, Canada, Canadian Natural Resources (CNQ) has operations that are heavily focused in the Canadian oil sands, and its fields are set to last until the 2050’s and beyond. The company has recently set its focus on becoming a net zero emitter, and since its projects are already in production, it should face less environmental opposition than yet-to-be-built oil projects. Already hugely profitable Canadian Natural seems set to reap the rewards as many large operators, like ExxonMobil Corp. (XOM), reduce supply.
Canadian Natural is the recent recipient of an upgrade to Buy from Goldman Sachs, along with a $44 price target, based on potential upside to consensus and material free cash flow generation on its above-consensus oil price outlook. Goldman’s Neil Mehta sees Canadian Natural “generating 20% free cash flow yield in 2022 enabling deleveraging and potential for buybacks, including its already peer leading dividend.”
According to Mehta, risk around the Line 3 replacement project that would add more barrel capacity has been “more than priced into valuation, “ as CNQ shares have underperformed Canadian oil peers by around 13% since mid January.
For the first quarter, ended March 31, 2021 CNQ’s product sales increased 50.9% year-over-year to CAD 7.02 billion ($5.80 billion). Its net income was CAD1.38 billion ($1.14 billion) compared to a CAD 1.28 billion ($1.06 billion) net loss in the prior year. Analysts expect CNQ’s annual revenue to increase 59.8% year-over-year to $21.31 billion in fiscal 2021.
CNQ stock has gained 104.3% over the past nine months. Among 21 analysts offer recommendations for the stock 17 say the stock is a Buy and 4 say Hold. There are no Sell ratings for CNQ stock. The company has consistently paid dividends over the past 19 years. The stock currently sports a nice, 4.08% yield.
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