Rapid industrialization and urbanization in developing countries are driving the energy industry's growth. Robust demand for energy presents opportunities for energy service companies to expand their offerings and market presence.
So, investors could consider watching quality energy stocks Liberty Energy Inc. (LBRT), North American Construction Group Ltd. (NOA), and REX American Resources Corporation (REX) in the coming week. These companies boast robust profit margins.
The global energy as a service (EaaS) market is projected to reach $147.56 billion by 2029, expanding at a CAGR of 11.1%.
Moreover, global oil demand is reaching record highs, driven by solid summer air travel, increased power use in power generation, and robust Chinese petrochemical activity. This year, global oil demand is expected to grow by 2.2 million barrels per day (mb/d) to 102.2 mb/d, with China accounting for over 70% of this growth.
Furthermore, rising global offshore rig count and increased investments from major oil and gas companies are expected to fuel global oilfield services market's expansion in the coming years.
In addition, the offshore segment is poised for growth due to the development of existing offshore wells, increased investments in deep-sea drilling, and growing subsea oil and gas assets. As a result, the global oilfield services market is anticipated to hit $427.60 billion by 2028, exhibiting a CAGR of 6.5%.
In light of these encouraging trends, let's look at the fundamentals of the three best Energy – Services stocks, beginning with number 3.
Stock #3: Liberty Energy Inc. (LBRT)
LBRT provides hydraulic services and related technologies to North American onshore oil and natural gas exploration and production companies. It offers customers hydraulic fracturing and complementary services, including wireline services, proppant delivery solutions, data analytics, related goods (including its sand mine operations), and technologies.
LBRT’s trailing-12-month ROTC of 26.49% is 149.9% higher than the 10.60 % industry average. Its trailing-12-month asset turnover ratio of 1.85% and 203.4% higher than the industry average of 0.61x.
On June 20, 2023, the company paid its shareholders a dividend of $0.05 per share of Class A common stock. LBRT’s four-year average dividend yield is 1.02%. Its annual dividend of $0.20 translates to a 1.11% yield on the current prices. Moreover, LBRT has raised its dividends at a CAGR of 32% over the past five years.
During the fiscal second quarter, which ended June 30, 2023, LBRT’s revenue increased 27% year-over-year to $1.26 billion. Its operating income improved significantly from the year-ago value to $225.12 million. Also, the company’s net income amounted to $162.66 million and $0.90 per share, rising 6.6% and 3.4% from the previous-year quarter.
LBRT’s EPS and revenue are expected to grow 22% and 11.8% year-over-year to $3.19 and $4.64 billion in the current year ending December 2023. The company surpassed the consensus EPS and revenue estimates in three of the trailing four quarters, which is impressive.
Over the past six months, the stock has gained 31.6% to close the last trading session at $18.01.
LBRT’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Momentum and a B for Value. Among the 47 stocks in the Energy – Services industry, it is ranked #14.
Click here for the other ratings of LBRT for Growth, Stability, Sentiment, and Quality.
Stock #2: North American Construction Group Ltd. (NOA)
Headquartered in Acheson, Canada, NOA provides equipment maintenance and mining and heavy construction services in Canada, the United States, and Australia. The company serves resource development and industrial construction sectors.
NOA’s trailing-12-month ROCE of 26.13% is 21.2% higher than the 21.57% industry average. Also, its trailing-12-month asset turnover ratio of 0.94x is 53.2% higher than the 0.61x industry average.
On July 26, NOA announced its definitive purchase and sale agreement to acquire MacKellar Group, situated in Australia, renowned for its expertise in providing heavy earthworks solutions to the mining and civil industries. MacKellar Group has established an impressive track record spanning several decades.
NOA pays an annual dividend of $0.28, which translates to a yield of 1.25% on the current market price. Its four-year average dividend yield is 1.31. The company has raised its dividend payout at a CAGR of 35.2% over the past five years.
In the fiscal second quarter, which ended on June 30, 2023, NOA’s revenue increased 15.2% year-over-year to C$193.57 million ($142.78 million). Its gross profit rose 73.1% from the year-ago quarter to C$21.53 million ($15.88 million).
In addition, the company’s adjusted net earnings and adjusted EPS amounted to C$12.49 million ($9.21 million) and C$0.47, up 164.7% and 176.5% from the prior-year quarter, respectively.
Analysts expect NOA’s revenue and EPS to rise 12.7% and 9.7% year-over-year to $159.05 million and $0.46 in the fiscal third quarter ending September 2023. Moreover, the company has an impressive surprise history, surpassing the consensus revenue estimates in each of the trailing four quarters.
NOA’s shares have gained 91.5% over the past year and 77% over the past nine months to close the last trading session at $23.10.
It is no surprise that NOA has an overall rating of B, which translates to Buy in our proprietary rating system.
It has an A grade for Momentum and Sentiment. In the same industry, it is ranked #8.
To see additional POWR Ratings for Growth, Value, Stability, and Quality for NOA, click here.
Stock #1: REX American Resources Corporation (REX)
REX produces and sells ethanol in the United States. The company also offers corn, distillers grains, non-food grade corn oil, gasoline, and natural gas. In addition, it provides dry distillers grains with soluble, which is used as a protein in animal feed.
REX’s trailing-12-month asset turnover ratio of 1.47x is 140.1% higher than the 0.61x industry average. Its trailing-12-month cash per share of $5.84 is 772.6% higher than the industry average of $0.67.
REX’s net sales and revenue amounted to $211.98 million in the fiscal second quarter ended July 31, 2023. Its gross profit rose 49.4% from the prior-year quarter to $18.35 million. The company’s net income stood at $12.28 million and $0.52 per share.
Street expects REX’s EPS for the current quarter (ending October 2023) to increase 377.8% year-over-year to $0.86. Moreover, it topped the EPS estimates in each of the trailing four quarters.
The stock has gained 40.4% over the past year to close the last trading session at $39.65.
REX’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
It has a B grade for Sentiment, Stability, and Quality. Within the same industry, it is ranked #5.
Access REX’s additional ratings for Growth, Value, and Momentum here.
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LBRT shares were trading at $18.34 per share on Thursday morning, up $0.33 (+1.83%). Year-to-date, LBRT has gained 15.69%, versus a 18.44% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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