Here’s why Pioneer (PXD) is an attractive investment bet now
Pioneering Natural Resources Company PXD has witnessed upward revisions to earnings estimates for 2021 and 2022 over the past 30 days. Moreover, the share price of this major independent oil and gas exploration and production company has jumped 42.3% since the start of the year, compared to a rise of 22.4% for the sector.
Factors favoring the stock
The price of West Texas Intermediate crude, which is trading above $65 per barrel (at pre-pandemic levels), has improved significantly from the negative territory hit in April 2020. The momentum is expected to continue as the Deployment of the coronavirus vaccine may help the economy, which has recovered strongly this year, which has helped demand for fuel.
Recently, the price of oil hit record highs in more than a year after it was decided by OPEC+ (OPEC and its non-OPEC partners) to extend most oil production cuts until April.
All in all, the massive improvement in the price of oil is definitely a boon for explorers and oil producers. Pioneer Natural is also well positioned to capitalize on the favorable pricing scenario as the company has a strong presence in the low-cost Permian Basin. The upstream energy player has a large inventory of premium wells that will likely generate significant returns for the business.
The upstream company recently announced a dividend hike. It is important to note that in 2020 Zacks Rank #2 (buy) company generated free cash flow of $689 million and the metric will likely improve with the business scenario gradually improving with the rise oil prices. Notably, Pioneer projects free cash flow for 2021 at $2 billion. Thus, the company will likely continue to reward investors with dividend payments.
Additionally, Pioneer Natural has significantly lower exposure to debt capital than industry-owned composite stocks. This reflects the company’s strong balance sheet that the business can rely on to weather pandemic-induced business uncertainty.
Other actions to consider
Other potential energy players include EOG Resources, Inc. EOG, Conoco Phillips COP and Diamondback Energy, Inc. FANG. While EOG Resources and ConocoPhillips carry a Zacks rank #2, Diamondback sports a Zacks rank #1 (strong buy). You can see the full list of today’s Zacks #1 Rank stocks here.
EOG Resources is expected to see earnings growth of 206% in 2021.
ConocoPhillips has seen upward revisions to 2021 earnings estimates over the past 30 days.
Diamondback is expected to see 55% profit growth in 2021.
These stocks are poised to outrun the pandemic
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