Despite recovering from pandemic-induced lows last year, the industrial and manufacturing sectors face huge pressures from multi-year high inflation, deepening supply chain constraints, and the recent resurgence of COVID-19 cases. This, along with the ban on oil and gas imports from Russia, has been leading to surging oil prices, which is an early indication of a recession. Investors’ worries over these factors have been causing immense volatility in the stock markets lately.
As investors seek ways to dodge the market volatility, which is not expected to end soon, betting on large-cap stocks in the energy and metals industries could be wise now, owing to their ability to generate stable returns and profit during inflationary periods. With nations trying to ease supply chain bottlenecks, boost domestic production, and focus on infrastructure projects now, large-cap stocks with better exposure and wide market reach should benefit more than their smaller counterparts in the coming months. Investors’ interest in large-cap stocks is evident from the SPDR S&P 500 Trust ETF’s (SPY) 5.5% returns over the past month.
Prominent large-cap stocks Canadian Natural Resources Limited (CNQ), Tenaris S.A. (TS), Sasol Limited (SSL), First Quantum Minerals Ltd. (FQVLF), and Occidental Petroleum Corporation (OXY), which have rallied more than 35% so far this year, are well-positioned to move higher in the near-term. So, it could be wise to bet on these stocks now.
Canadian Natural Resources Limited (CNQ)
With a $76.09 billion market capitalization, Canada-based CNQ acquires, explores for, develops, produces, markets, and sells crude oil, natural gas, and natural gas liquids (NGLs). The company offers synthetic crude oil (SCO), light and medium crude oil, bitumen (thermal oil), primary heavy crude oil, and Pelican Lake heavy crude oil. It operates primarily in Western Canada, the United Kingdom (UK) portion of the North Sea, and Cote d'Ivoire and South Africa in Offshore Africa, and also in areas having existing pipelines systems and access to exploration activities.
On December 17, 2021, CNQ completed the acquisition of Storm Resources Ltd., a Canada-based oil and gas exploration and development company, for a cash consideration of $6.28 per share. Storm’s current production acquired by CNQ is approximately 136 million cubic feet per day of natural gas and 5,600 barrels per day of NGLs. The company’s production, infrastructure, and land complement CNQ’s natural gas assets in the Northeast British Columbia area, allowing it to leverage synergies within its diversified portfolio.
For its fiscal 2021 fourth quarter ended December 31, 2021, CNQ’s revenue increased 83.6% year-over-year to C$9.21 billion ($7.34 billion). The company’s pre-tax income came in at C$3.41 billion ($195.68 million), indicating a 349.3% year-over-year improvement. While its net earnings increased 238.3% year-over-year to C$2.53 billion ($2.02 billion), its EPS grew 239.7% to C$2.14. As of December 31, 2021, the company had C$744 million ($593.04 million) in cash and cash equivalents.
Analysts expect CNQ’s EPS to improve 15.5% year-over-year to $7.90 in fiscal 2022, ending December 31, 2022. The company surpassed Street EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $29.56 billion for the same fiscal year indicates a 24.4% year-over-year improvement. The stock has gained 54.9% year-to-date and closed yesterday’s trading session at $65.45.
CNQ’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has an A grade for Momentum and a B grade for Sentiment and Quality. Click here to see the additional ratings for CNQ’s Growth, Value, and Stability.
CNQ is ranked #18 of 42 stocks in the A-rated Foreign Oil & Gas industry.
Tenaris S.A. (TS)
Based in Luxembourg, TS produces and sells seamless and welded steel tubular products and provides related services for the oil and gas industry and other industrial applications. The company also provides sucker rods, industrial equipment, heat exchangers, and utility conduits for buildings and sells energy and raw materials. In addition, it offers financial services. It has a market cap of $19.73 billion.
TS’ net sales for its fiscal year 2021 fourth quarter ended December 31, 2021, increased 82% year-over-year to $2.06 billion. The company’s gross profit came in at $656.79 million, representing a 179.3% year-over-year improvement. Its operating income was $273.32 million, representing a 3601% rise from the prior-year period. TS’ net income came in at $336.14 million for the quarter, representing a 207% rise from the year-ago period. And as of December 31, 2021, the company had $318.13 million in cash and equivalents.
The consensus EPS estimate of $2.50 for fiscal 2022 ending December 31, 2022, represents a 34.4% year-over-year improvement. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive. Analysts expect TS’ revenue to improve 48.3% year-over-year to $9.67 billion for the same fiscal year. The stock has gained 58.2% year-to-date and ended yesterday’s trading session at $33.
TS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has an A grade for Momentum and a B grade for Growth, Sentiment, and Quality. Click here to see the additional ratings for TS (Value and Stability).
TS is ranked #16 of 34 stocks in the A-rated Steel industry.
Sasol Limited (SSL)
Based in South Africa, SSL operates as an integrated chemical and energy company. The company operates coal mines and develops and manages upstream interests in oil and gas exploration and production in Mozambique, South Africa, Canada, and Gabon. It also markets and sells liquid fuels, pipeline gas, electricity, organic and inorganic commodity, and specialty chemicals and develops, implements, and manages international gas-to-liquids processes. It has a $16.37 billion market capitalization.
On April 13, 2022, SSL joined the Concrete Chemicals project, an innovative consortium of its new business unit Sasol ecoFT, global cement producer CEMEX S.A.B. de C.V (CX), and German renewable energy company ENERTRAG, a high-tech company, providing Subsea Identification systems using RFID. Sasol ecoFT will contribute its innovative Fischer-Tropsch technology to produce synthetic and sustainable aviation fuels, and ENERTRAG will produce green hydrogen exclusively with energy from regional wind and solar plants. CEMEX will provide another raw material for SAF production by capturing CO2 generated during cement production. This international consortium sets a course for climate-neutral cement production by converting CO2 into sustainable aviation fuels (SAF) with hydrogen. This should contribute to SSL’s sustainability goals.
SSL’s turnover for its fiscal 2021 half-year ended December 31, 2021, increased 11.1% year-over-year to R119.91 billion ($8.19 billion). The company’s adjusted EBIT came in at R31.80 billion ($2.17 billion), representing a 70.9% year-over-year improvement. Its net earnings came in at R16.05 billion ($1.10 billion) for the quarter, indicating a 5% rise from the prior-year period. SSL’s EPS increased 1.7% year-over-year to R23.68. The company had R30.51 billion ($2.08 billion) in cash and cash equivalents as of December 31, 2021.
Analysts expect the company’s EPS to grow 47.9% from the prior-year period to $3.96 for fiscal 2022, ending June 30, 2022. The consensus revenue estimate of $16.68 billion for the same fiscal year indicates a 22.5% year-over-year improvement. The stock has gained 57.1% year-to-date and closed yesterday’s trading session at $25.77.
SSL’s POWR Ratings reflect its solid prospects. It has an overall rating of B, which equates to Buy in our proprietary rating system.
The stock has an A grade for Sentiment and a B grade for Quality. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for SSL’s Stability, Growth, Value, and Momentum here.
SSL is ranked #20 in the A-rated Foreign Oil & Gas industry.
First Quantum Minerals Ltd. (FQVLF)
Headquartered in Toronto, Canada, FQVLF engages in the exploration, development, and production of mineral properties, primarily copper, nickel, pyrite, gold, silver, and zinc ores. The company operates mines located in Zambia, Panama, Finland, Turkey, Spain, Australia, and Mauritania. It has a $22.61 billion market capitalization.
FQVLF’s sales revenues for the fiscal 2021 fourth quarter ended December 31, 2021, increased 32% year-over-year to $2.06 billion. The company’s gross profit came in at $784 million, indicating a 77% year-over-year improvement. Its operating profit came in at $722 million, up 102.2% from the prior-year period. While its adjusted net earnings increased 477.4% year-over-year to $306 million, its adjusted EPS grew 450% to $0.44. As of December 31, 2021, the company had $1.86 billion in cash and cash equivalents.
Analysts expect FQVLF’s EPS to improve 116.7% year-over-year to $2.60 for its fiscal 2022, ending December 31, 2022. It surpassed Street revenue estimates in each of the trailing four quarters. The consensus revenue estimate of $8.52 billion for the same fiscal year represents an 18.1% rise from the prior-year period. The stock has gained 37.3% year-to-date and ended yesterday’s trading session at $32.95.
FQVLF’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has a B grade for Growth and Quality. Click here to see the additional ratings for FQVLF (Value, Stability, Sentiment, and Momentum).
FQVLF is ranked #3 of 48 stocks in the Miners - Diversified industry.
Occidental Petroleum Corporation (OXY)
With a $55.86 billion market cap, OXY engages in internationally acquiring, exploring, and developing oil and gas properties. The company operates through three segments ─ Oil and Gas; Chemical; and Marketing, and Midstream. It also trades around its assets, including transportation and storage capacity, and invests in entities that conduct similar activities.
On March 29, 2022, OXY’s Oxy Low Carbon Ventures (OLCV) subsidiary and United Airlines Ventures (UAV) announced a collaboration with biotech firm Cemvita Factory to commercialize the production of sustainable aviation fuel (SAF) intended to be developed through a revolutionary new process using CO2 and synthetic microbes. This fund offering for the development of SAF will significantly reduce global emissions from aviation and promote companies’ decarbonization initiatives to combat climate change.
For its fiscal 2021 fourth quarter ended December 31, 2021, OXY’s total revenue increased 139.3% year-over-year to $8.01 billion. The company’s pre-tax income came in at $2.03 billion for the quarter, versus $1.43 billion in the prior-year period. Its adjusted net income came in at $1.65 billion, compared to a loss of $2.84 billion in the year-ago period. OXY’s adjusted EPS came in at $1.48 versus a $0.65 loss per share in the prior-year period. It had $2.76 billion in cash and cash equivalents as of December 31, 2021.
Analysts expect the company’s EPS to improve 201.6% year-over-year to $7.69 in fiscal 2022, ending December 31, 2022. The consensus revenue estimate of $33.66 billion for the same fiscal year indicates a 27.9% year-over-year improvement. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive. The stock has gained 105.7% year-to-date and ended yesterday’s trading session at $59.62.
OXY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has an A grade for Growth and Momentum and a B grade for Quality. Click here to see the additional ratings for OXY (Value, Sentiment, and Stability).
The stock is ranked #28 of 97 stocks in the Energy - Oil & Gas industry.
CNQ shares fell $0.13 (-0.20%) in after-hours trading Thursday. Year-to-date, CNQ has gained 57.27%, versus a -7.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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