Three Energy Stocks with 25 Percent Potential Upside (ACI, CIE, HAL)
A new research report from UBS (NYSE: UBS) features a list of stocks that the analysts not only recommending buying, but which they feel have at least 25 percent potential upside from current levels, despite the markets being near all-time highs.
Three energy-related stocks made the list: Arch Coal (NYSE: ACI), Cobalt International Energy (NYSE: CIE) and Halliburton (NYSE: HAL). Below is a quick look at how these three stocks have fared and what analysts expect from them.
Some other picks on the UBS list of stocks with significant upside potential include Citigroup (NYSE: C), Delta Air Lines (NYSE: DAL), Whole Foods Market (NASDAQ: WFM) and even Monster Beverage (NASDAQ: MNST).
This St. Louis-based coal mining company sports a market capitalization of near $1 billion. Its dividend yield is about 2.2 percent. But its long-term earnings per share (EPS) growth forecast is only about five percent. While the operating margin is better than the industry average, Arch Coal has a negative return on equity.
The short interest in Arch Coal was more than 14 percent of the float as of the March 15 settlement date. That was the second lowest number of shares sold short so far this year.
The consensus recommendation of the analysts that follow the stock and were polled by Thomson/First Call is to hold shares, and it has been for at least three months. The mean price target, or where the analysts expect the share price to go, of $7.65 represents more than 32 percent potential upside. The UBS price target is even higher at $9.00.
The share price is down more than 27 percent year-to-date, and not far above the 52-week low. Over the past six months, the stock has underperformed competitors Alpha Natural Resources (NYSE: ANR) and Peabody Energy (NYSE: BTU), as well as the broader markets.
Cobalt International Energy
Based in Houston, this independent oil exploration and production company has a market cap of more than $11 billion, but it does not offer a dividend. Its long-term EPS growth forecast is almost 19 percent. But here too the return on equity is in the red. Cobalt International Energy reported a net loss per share in the most recent quarter, and it is expected to do so again in the current quarter.
The short interest in Cobalt International Energy was about three percent of the float in the middle of March. The number of shares sold short was up about five percent from the end of February, and days to cover rose to more than four.
Yet, all 14 analysts surveyed recommend buying shares, five of them rating the stock at Strong Buy. Their mean price target of $38.39 is more than 27 percent higher than the current share price. But note that the UBS price target is just $36.
The share price is more than nine percent higher year to date, despite pulling back a bit in the past couple of days. Over the past six months, the stock has outperformed competitor Nobel Energy (NYSE: NBL) and the broader markets.
This oil field services giant is headquartered in Houston and has a market capitalization of about $37 billion, as well as a dividend yield near 1.2 percent. The price-to-earnings (P/E) ratio is less than the industry average, and the long-term EPS growth forecast is more than 16 percent. The return on equity is almost 18 percent.
The number of shares sold short as of mid-March represented more than two percent of the total float. That was up more than six percent from the previous period and ended a three period streak of declining short interest.
All but seven of the 34 surveyed analysts recommend buying shares; 12 of them rate shares at Strong Buy. The analysts feel the stock has room to run, as the mean price target of $49.04 represents about 19 percent potential upside over the current share price. The UBS price target is $53.
The share price is up almost 12 percent year-to-date, despite retreating more than seven percent from a 52-week high in February. The stock has outperformed competitors Baker Hughes (NYSE: BHI) and Schlumberger (NYSE: SLB), as well as the broader markets, over the past six months.
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