3 Energy Stocks That Could Benefit From the Manchin Bill

Last week, Joe Manchin, a West Virginia Democratic senator, announced that he supports the Inflation Reduction Act of 2022. The $739 billion expansive bill would address record-high inflation by paying down the national debt, producing more energy, and lowering energy and healthcare costs. Also, it could reduce nearly 40% of carbon emissions by 2030.

“Our persistent and increasing dependence on foreign energy and supply chains from countries who hate America represents a clear and present danger that must end. The increased risk of geopolitical uncertainty demands that we focus on increasing U.S. energy production and bringing good paying energy and manufacturing jobs back to America,” Manchin stated.

The Manchin Bill could be a boon for the energy sector. The deal includes approximately $370 billion in energy and climate spending and addresses the nation’s energy and climate crisis by adopting solutions through strategic and historical investments. The legislation contains tax credits to boost clean energy production, domestic clean energy manufacturing, and incentives for energy efficiency.

Shares of quality energy companies FirstEnergy Corp. (FE), Via Renewables, Inc. (VIA), and Natural Gas Services Group, Inc. (NGS) are expected to benefit from the new budget reconciliation bill that includes increased energy security and spending over the next ten years.

FirstEnergy Corp. (FE)

FE generates, transmits, and distributes electricity in the United States. The company operates through two segments: Regulated Distribution and Regulated Transmission. It owns coal-fired, nuclear, natural gas, hydroelectric, wind, and solar power generating facilities. It operates nearly 24,070 circuit miles of overhead and underground transmission lines and electric distribution systems.

On July 27, FE’s subsidiary, Met-Ed, completed a project to upgrade its distribution system in southern Monroe County to help prevent or minimize the length of service disruptions. The project included rebuilding existing power lines and installing automated equipment on the local network to restore power faster for nearly 2,300 customers.

On July 18, FE’s Ohio utilities-Ohio Edison, Cleveland Electric Illuminating Company, and Toledo Edison, filed a plan with the Public Utilities Commission of Ohio (PUCO) to expand smart grid technology investments. The filing, known as Ohio Grid Mod II, proposes a four-year, $626 million investment plan.

“The projects we've completed under Grid Mod I have successfully reduced many power interruptions. This has laid the foundation for further enhancing service reliability across our entire service area in Ohio,” said Sam Belcher, FE’s Senior Vice President.

In the fiscal 2022 first quarter ended March 31, 2022, earnings attributable to FE increased 222.4% year-over-year to $187 million. Its earnings per share rose 200% from the year-ago value to $0.33.

Analysts expect FE's revenue for the fiscal 2023 first quarter (ending March 2023) to come in at $3.12 billion, representing a 4.5% rise from the same period in 2021. Also, Street expects the company's EPS for the same quarter to come in at $0.62, representing a growth of 3.8% year-over-year.

FE’s shares have gained 5.4% over the past year to close the last trading session at $40.52.

FE's POWR Ratings reflect this promising outlook. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

FE has a grade of B for Momentum. It is ranked #12 of 67 stocks in the Utilities-Domestic industry. Click here to see FE's POWR Ratings for Growth, Value, Stability, Sentiment, and Quality.

Via Renewables, Inc. (VIA)

VIA operates as an independent retail energy services company in the United States. The company operates through two segments: Retail Electricity; and Retail Natural Gas. It distributes and sells electricity and natural gas to residential and commercial customers. It operates in more than 101 utility service territories across 19 states and the District of Columbia.

Last month, VIA announced a new $195 million senior secured borrowing base credit facility to replace its existing senior secured credit facility. The new Senior Credit Facility provides working capital loans, Swingline loans, acquisition loans, and letters of credit.

“The successful closing of this facility demonstrates our continued proactive approach to managing our balance sheet. This agreement positions us to execute on our strategic initiatives, invest in our growth opportunities, and continue our disciplined pursuit of acquisitions that can accelerate our growth,” said Keith Maxwell, VIA’s President, and CEO.

In the fiscal 2022 first quarter ended March 31, 2022, VIA's revenues increased 12.5% year-over-year to $127.15 million. Its operating income came in at $38.33 million, compared to a $27.87 million loss in the prior-year period. The company’s net income and net income attributable to VIA per share of Class A common stock amounted to $31.03 million and $0.70, up 212.6% and 206.1% year-over-year, respectively.

The $3.06 billion consensus revenue estimate for the fiscal year 2023, ending December 2022, represents a 7.4% improvement from the last year. Analysts expect CCU’s EPS for the next year to increase 22.6% year-over-year to $1.03. The company has topped the consensus revenue estimates in three of the trailing four quarters.

The stock has gained 6.9% over the past month to close the last trading session at $8.22.

VIA’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of B, equating to a Buy in our proprietary rating system.

VIA has a grade of A for Value and B for Momentum. Within the Utilities-Domestic industry, it is ranked #6 of 67 stocks. Click here to see additional VIA POWR Ratings (Quality, Growth, Stability, and Sentiment).

Natural Gas Services Group, Inc. (NGS)

NGS provides natural gas compression services and equipment to the energy industry in the United States. The company engages in the rental of compression units that offer small, medium, and large horsepower applications for oil and natural gas production. Its rental fleet has approximately 2,023 natural gas compression units with 418,041 horsepower.

The company’s primary customers include exploration and production (E&P) and midstream companies.

In July, NGS announced a commitment to electrification by converting up to 100 compressor packages from combustible gas engines to electric motors over the next three-to-six months.

“Not only does this initial electrification commitment stand in support of our commitment to reducing our carbon footprint by reducing greenhouse emissions, but it also addresses the growing demand from our clients for electric compression options. It also allows us to reinvent and redeploy equipment on terms that we believe will provide a meaningful contribution to revenue, EBITDA, and cash flow,” said John Chisholm, Interim President, and CEO.

NGS's revenue increased 10.5% year-over-year to $20.34 million in the fiscal 2022 first quarter ended March 31, 2022. Its adjusted gross margin rose 4.3% from the year-ago value to $8.95 million. 

The company’s adjusted EBITDA stood at $6.83 million, up 5% year-over-year. Its net income and earnings per share came in at $337 million and $0.03, up 185.5% and 200% from the prior-year period, respectively.

The consensus revenue estimate of $78.80 million for the fiscal year 2022 (ending December 2022) represents an 8.8% rise from the prior-year period. Analysts expect NGS’s EPS to grow 66.7% year-over-year. Also, Street expects its EPS to grow 10% per annum over the next five years.

The stock has gained 1.1% over the past year to close the last trading session at $9.73.

NGS's POWR Ratings reflect a promising outlook. The stock has an overall B grade, which equates to a Buy in our proprietary rating system.

NGS has a grade of A for Sentiment and Momentum. It has a B grade for Quality. Within the Energy - Services industry, it is ranked #9 of 46 stocks. Click here to see additional POWR Ratings (Value, Growth, and Stability) for NGS.

FE shares were unchanged in after-hours trading Tuesday. Year-to-date, FE has declined -2.84%, versus a -13.45% rise in the benchmark S&P 500 index during the same period.

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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