The last year has been tough for German companies with the outbreak of a war, supply chain disruptions, and soaring energy prices. The stocks of German energy companies were also hit due to their higher dependence on the Russian gas supply. However, rising energy prices benefited these businesses as well.
Using the TipRanks Stock Screener tool, we have shortlisted two such players from the German energy market. E.ON SE (DE:EOAN) and RWE AG (DE:RWE) are among the top energy companies in Europe. These companies have a decent dividend yield, a good outlook for 2023, and a Buy rating from analysts. What’s now to like?
Let’s discuss these German stocks in detail.
E.ON SE
E.ON SE is a leading energy company engaged in the production and distribution of electricity and gas. The company has a huge energy network of 1.6 million kilometers, which serves around 51 million customers.
After trading down by 12% in the last year, the company’s stock has gained momentum and has gained 21% in the last six months. The company’s third-quarter results played an important role in pushing the share price up. The company posted sales of €81.6 billion in the first nine months of 2022, which is 70% higher than the same period numbers of 2021. Net income increased by 10% to €4.3 billion. These numbers were mainly driven by the higher commodity prices in markets like the UK, Germany, and the Netherlands.
Another important factor for the company on which analysts are bullish is its dividends. The company has a dividend yield of 4.95%, better than its industry peers.
E.ON’s stock also checks the box on the valuation front. The company has a P/E ratio of 5.5, which makes it an attractive buy in this sector.
E.ON Share Price Forecast
According to TipRanks’ analyst consensus, E.ON stock has a Moderate Buy rating. The stock has a total of 14 ratings, of which seven are Buy and seven are Hold recommendations.
The stock’s price forecast is €10.55, which shows a change of 7.7% from the current price level.
Andrew Fisher from Berenberg Bank and Peter Crampton from Barclays have the highest target price of €12.50 on the stock. It implies an upside potential of 28%.
Fisher’s six out of seven ratings were profitable for the stock, and he has a success rate of 86%. Crampton, on the other hand, has more than 20 profitable ratings on the stock, with a success rate of 73%.
RWE AG
RWE is a leading energy company with operations in Asia-Pacific, Europe, and the United States. The company has a strong foothold in the renewable energy space, and it plans to achieve carbon neutrality by 2040.
The company is also targeting doubling its energy generation capacity in its core businesses. This will further push its earnings to €5 billion by 2030.
RWE’s stock has generated a return of more than 50% for its shareholders in the last three years. In the last troublesome year for energy companies, its stock managed to gain 15%. The analysts still feel that there is further scope for an increase in the share price as the company’s valuation does not factor in its fast shift towards green energy.
Is RWE Stock a Buy?
RWE stock has a Strong Buy rating on TipRanks, with a clear majority of 13 Buy recommendations.
The target price is €53.6, which has a good upside of 37.7% on the current price level of €38.94.
Five-star rated analyst Crampton is bullish on RWE as well, with a target price of €54. He has recently retained his Buy rating on the stock. He mentions RWE as his favorite European stock and has even raised his EPS forecast for 2023 and 2024. On TipRanks, the consensus EPS forecast is €1.12.
Conclusion
Moving forward, analysts believe that both companies will remain cautious as they deal with supply issues. But, the companies are also optimistic about the earnings growth and are looking forward to closing out 2022 on a favorable note.
