During times of economic uncertainty, investing in the stock market becomes a challenge due to several variables, millions of stocks options and limited risk-reward appetite.
TipRanks’ Analysts Top Stocks Tool provides a solution by offering sector-wise break-up of the top stock picks recommended by analysts. Currently, analysts are highly bullish on the Utilities, Technology, and Consumer Goods sector as is visible from the chart below.
Looking at current market trends, oil prices have been on a steady rise since last December, ranging around $75 and currently hovering above $100. Oil prices surpassed all-time highs of ~$123 at the beginning of March 2022, after Russia invaded Ukraine.
Similarly, the pandemic-triggered supply chain and logistics issues have made air cargo carriers and shipping companies very valuable as the economy depends on their readiness and availability to transport the cargo across varied locations worldwide.
We have chalked down three quality stocks from the list, which seem to be underappreciated but have strong potential to outperform in the near term.
Let us take a closer look at two oil & gas producing companies and one shipping company, which are poised for exponential growth in the coming quarters.
PDC Energy (PDCE)
Based out of the U.S., PDC Energy engages in the acquisition, exploration, and development of properties for the production of crude oil, natural gas, and natural gas liquids. Its primary operations are located in the Wattenberg Field in Colorado and the Delaware Basin in Texas.
Amid rising commodity prices due to the ongoing war, the company’s stock price has received an unusual boost in the past month. Year-to-date its stock has gained 45% and over the past month, the PDCE stock is up 12.6%.
In its latest results for the fourth quarter and year ending December 31, 2021, PDCE saw its adjusted earnings grow a whopping 160% to $2.86 per share. Similarly, quarterly revenues advanced 207% to $854.64 million. For the full year of fiscal 2021, PDCE reported adjusted earnings of $7.99 per share on revenues of $1.86 billion.
Notably, alongside the Q4 results, PDCE announced a noteworthy acquisition of Wattenberg for an aggregate price of $1.3 billion, which will be funded with cash on hand and borrowings. The acquisition, which is expected to close in Q2FY22, will further boost the company’s scale by adding 55,000 Boe per day with 135 identified locations. The acquisition will be accretive to PDCE’s year-end financial metrics and the company expects the year-end pro forma leverage ratio to be less than 0.7x.
The company also announced a shareholder return framework with a pledge to return a minimum of 60% of annual post-dividend FCF, consisting of buybacks and a special dividend, and raised its base dividend. PDCE also increased its buyback authorization to $1.25 billion through 2023.
Looking at its profitability ratios, PDC Energy claims a return on common equity (ROCE) ratio of 18.90%, much higher than the industry average of 8.84%. Additionally, the company scores a net income margin of 21.83%, again higher than the industry average of 7.34%.
Moreover, the PDCE stock scores a “Perfect 10” score on the TipRanks Smart Score rating system. The bloggers’ opinions are 100% bullish on the stock, while hedge fund investors have increased their exposure to the stock by buying 153.6K shares over the last quarter.
Wall Street analysts have awarded the PDCE stock a Strong Buy consensus rating based on eight Buys and one hold. The average PDC Energy price forecast of $82.78 implies almost 10% upside potential to current levels.
Tourmaline Oil (TRMLF)
Next up, we have one of Canada’s largest energy companies, Tourmaline Oil, which is engaged in natural gas and crude oil acquisition, exploration, development, and production in the Western Canada Sedimentary Basin.
Supported by the inflationary commodity environment, the TRMLF stock has gained 41.4% year-to-date and more than 10% over the past month.
In Q4, the company’s production averaged 485,078 Boe per day, increasing 44% year-over-year. Additionally, in Q4, the company generated $545.9 million of FCF, recorded $1.53 billion (122% year-over-year growth) in revenue, and reported diluted earnings of $2.96 per share (30% year-over-year jump).
Notably, Tourmaline generated a record $1.49 billion of FCF in 2021 and reported diluted earnings of $6.40 per share on total revenue of $4.67 billion.
Tourmaline continues to reward shareholders with regular dividend payments. Recently the company has even increased its base dividend to $0.80 per share and also paid a special dividend of $1.25 per share in February.
Tourmaline Oil displays a ROCE ratio of 19.85%, much superior to the industry average of 8.84%. Moreover, the company scored a net income margin of 42.51%, much higher than the industry average of 7.34% and even outpacing its five-year average of 21.16%.
Notably, the TRMLF stock scores a “Perfect 10”, according to the TipRanks Smart Score tool. Blogger sentiments are 100% bullish on the TRMLF stock, and corporate insiders have bought shares worth C$1.2 million in the last quarter.
Turning to analysts’ view, with nine unanimous Buys, the TRMLF stock has a Strong Buy consensus rating. The average Tourmaline Oil price forecast of $56.24 implies 24.4% upside potential to current levels.
ZIM Integrated Shipping Services Ltd. (ZIM)
Last up on the analysts’ radar is Israel-based ZIM Integrated Shipping, an asset-light container liner shipping company. Its services include Cargo Services, Digital Services, Schedules, and Shipping Trades & Lines.
ZIM stock is up 59% year-to-date, against a 4.4% gain over the past month.
The company reported a blowout fourth-quarter performance for the period ending December 31, 2021. The company’s Q4 revenue surged 155% to $3.47 billion and net income exploded 366% to $1.71 billion, representing $14.17 per share earnings.
ZIM also pays a consistent dividend to its shareholders. The company increased its annual dividend to $17.00 per share, representing a current dividend yield of 31.43%.
Amid capacity constraints and port congestion challenges, ZIM continues to enhance equipment investments and extend its operating fleet capacity to take advantage of increased ship demand.
Turning to ZIM’s profitability ratios, ZIM boasts of a ROCE ratio of a whopping 190.99%, far superior than the industry average of 13.68%. Similarly, the company has a net income margin of 43.25%, significantly higher than the industry average of 6.48%.
ZIM has a “Perfect 10” Smart Score according to the TipRanks Smart Score tool. Financial bloggers are 100% bullish on ZIM, and hedge funds have increased their exposure to the ZIM stock by 203.9K shares over the last quarter.
Turning to Wall Street analysts’ views, the ZIM stock has a Hold consensus rating based on one Buy, two Holds, and one Sell. The average ZIM Integrated Shipping Services price forecast of $82.35 implies 13.1% upside potential to current levels.
Concluding Thoughts
Amid geopolitical tensions, ongoing ill-effects of the pandemic, and an inflationary environment, these three stocks provide a safe bet for investors to park their corpus funds. The TipRanks’ Analysts Top Stocks tool can also help you to streamline stocks from industries of your choice and analyze the stocks which analysts on the street are highly optimistic about.
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