For Immediate Release
Chicago, IL –December 18, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Cabot Oil & Gas Corp. (NYSE:COG) , SilverBow Resources, Inc. (NYSE:SBOW) , Archrock, Inc. (NYSE:AROC) and TransCanada Corp. (TO:TRP) .
Here are highlights from Monday’s Analyst Blog:
These 4 Natural Gas Stocks Could Be Big Winners in 2019
Natural gas futures took a tumble last week, declining around 15%, after forecasts of bearish weather outlook raised some red flags regarding heating demand. On Friday, natural gas for January delivery fell 7.2%, to settle at $3.827 per MMBtu. The contract was down 14.7% for the week - the biggest in almost three years.
Although expectations of milder-than-expected December temperatures hinted at softening consumption, we believe the commodity is still supported by a robust long-term growth narrative. As such, we feel recent weakness is an opportunity to buy energy companies with a lot of exposure to natural gas.
Natural Gas Rockets Higher in 2018
Natural gas futures, which last month rose to its highest in four years, returned attractive gains in 2018, and are still trading significantly up in the year-to-date, despite the recent plunge.
In fact, natural gas prices are on a tear. Prices are up around 30% since the start of the year and soared 41% last month, making it the market’s best-performing commodity of November. Natural gas recently broke the $4 per MMBtu mark for the first time in four years with cooler weather conditions resulting in strong demand for the heating fuel. Despite skyrocketing production, natural gas entered the winter season with stockpiles at their lowest in 15 years.
Even now, the current storage remains well below benchmarks. At 2.914 trillion cubic feet (Tcf), natural gas inventories are nearly 20% under the five-year average and the year-ago figure.
Positive Long-Term Thesis: U.S. & Abroad
The fundamentals of natural gas continue to be favorable in the long run, considering the secular shift to the cleaner burning fuel for power generation globally and in the Asia-Pacific region in particular.
The EIA predicts global demand for the commodity to grow 43% from 2015 to 2040. Countries in Asia and in the Middle East – led by China’s transition away from coal – will account for most of this increase. The replacement of coal-fired power plants and higher consumption from industrial projects have also contributed to the strength in natural gas demand.
At the same time, natural gas has now replaced coal as the top choice for electricity generation in the United States. The demand for cleaner fuels and the commodity’s relatively lower price has catapulted natural gas' share of domestic electricity generation to 35%, from 25% in 2011.
New pipelines to Mexico, together with large-scale liquefied gas export facilities like Cheniere Energy’s Sabine Pass terminal and Dominion Energy’s Cove Point export plant, have meant that exports out of the U.S. are set for a quantum leap. As per the Energy Department, gross liquefied natural gas exports are set to average 5.25 Bcf per day in 2019, increasing nearly 80% from this year. Apart from surging exports, higher consumption from industrial projects will likely ensure strong natural gas demand.
Natural Gas Roadmap for 2019
Yes, natural gas had a great 2018 (till now that is) but what about 2019? Will history repeat itself?
While it’s hard to predict whether natural gas will soar again next year, there's reason to believe that 2019 could be an excellent one for natural gas stocks. In particular, if the current (2018-2019) winter turns out to be colder than normal, the surge in expected demand — in the face of relative deficit of natural gas inventory — could trigger a large rally in the commodity's price.
The strong year-to-date rally and the possibility of further price gains does not necessarily indicate that every natural gas scrip would be a wise pick. To guide investors to the right picks, we highlight four stocks that carry a Zacks Rank of #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our Choices
Cabot Oil & Gas Corp.: It is engaged in high-impact natural gas-focused drilling in the Marcellus Shale. The Houston, TX-based stock, which currently has a Zacks Rank #1, is a natural gas pure play. The company has an expected earnings growth of 20.1% for the next year. Over 60 days, the company has seen the Zacks Consensus Estimate for 2019 increase 21%.
SilverBow Resources, Inc.: This Houston, TX-headquartered oil and gas explorer — focused on the Eagle Ford shale located in South Texas — also has a Zacks Rank #1. The company has an expected earnings growth of 67.3% for the next year. Over 60 days, the company has seen the Zacks Consensus Estimate for 2019 increase 21.8%.
Archrock, Inc.: Archrock is a leading player in the natural gas compression and transmission business. The Houston, TX-based company has an expected earnings growth of 48.2% for the next year. Over 60 days, the Zacks Rank #2 company has seen the Zacks Consensus Estimate for 2019 increase 10.2%.
TransCanada Corp.: Calgary, Alberta-based TransCanada is primarily focused on natural gas transmission through its 57,100-mile network of pipelines located in Canada, the United States, and Mexico. The company has an expected earnings growth of 3.4% for the next year. Over 60 days, the Zacks Rank #2 company has seen the Zacks Consensus Estimate for 2019 increase 5.4%.
In addition to the stocks discussed above, would you like to know about our 10 top tickers to buy and hold for the entirety of 2019?
These 10 are painstakingly handpicked from over 4,000 companies covered by the Zacks Rank. They are our primary picks poised to outperform in the year ahead. Be among the first to see the new Zacks Top 10 Stocks >>
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Archrock, Inc. (AROC): Free Stock Analysis Report
TransCanada Corporation (TRP): Free Stock Analysis Report
Cabot Oil & Gas Corporation (COG): Free Stock Analysis Report
SilverBow Resources Inc. (SBOW): Free Stock Analysis Report
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