Tag: Exxon Mobil Corp

Big Oil’s green-bashing stokes backlash as campaigners hit out at ‘talking points from the 1970s’

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Saudi Aramco President & CEO Amin Nasser speaks during the CERAWeek oil summit in Houston, Texas, on March 18, 2024.

Mark Felix | Afp | Getty Images

Top oil executives have been sharply criticized for pushing back against the viability of the clean energy transition at a U.S. conference, with campaigners denouncing an industry claim that the shift away from fossil fuels is “visibly failing on most fronts.”

Speaking during a panel interview on Monday at the annual CERAWeek energy conference in Houston, Texas, Saudi Aramco chief executive Amin Nasser said that a transition strategy reset was “urgently needed.”

The CEO of the world’s largest energy company proposed that policymakers abandon the “fantasy” of phasing out oil and gas and instead “adequately” invest in fossil fuels to reflect growing demand. Aramco and Saudi ministry officials have previously advocated for ongoing investment in hydrocarbons to avoid energy shortages until renewables can fully meet global energy demands.

Nasser’s comments drew applause from the audience at CERAWeek — an annual energy conference by S&P Global that’s known as the “industry’s Super Bowl.”

Other oil and gas executives at the event echoed Nasser’s views, but spoke less directly about the state of the energy transition.

Shell CEO Wael Sawan said government bureaucracy in Europe was slowing the necessary development of clean energy, according to Reuters. Separately, Exxon Mobil CEO Darren Woods on Monday said that demand for petroleum products is “still very, very healthy.”

“So, I think one of the things the policy to date and a lot of the narrative has been very focused on is the supply side of the equation and hasn’t addressed the demand side of the equation. And the impact that price has on demand,” Woods told CNBC’s “Squawk on the Street.”

“At the same time, the cost of converting and moving to a lower-carbon society, if that cost is too high for consumers to bear, they won’t pay. And we’ve seen that play itself out in Europe, with some of the farm protests and the yellow vest protests a year or so ago,” he added.

Campaigners have hit out at the oil industry’s claims this week.

“The fossil fuel industry continues to make distorted claims about our energy future,” Jeff Ordower, North America director at 350.org — a U.S.-based group focused on the global energy transition — said in a statement on Tuesday.

“They work night and day to torpedo a transition to renewable energy and then have the audacity to critique the slowness of the transition itself,” Ordower said. “CERAWeek should highlight a global vision toward a clean and equitable future, and instead, we get talking points from the 1970s.”

Aramco, Exxon Mobil and Shell were not immediately available to comment when contacted by CNBC on Wednesday.

IEA vs. OPEC

The International Energy Agency has previously said it expects global oil, gas and coal demand to peak by 2030 — a forecast that Aramco’s Nasser rejected at CERAWeek. The energy watchdog said in October last year that the transition to clean energy is not only happening, but is “unstoppable.”

“It’s not a question of ‘if’, it’s just a matter of ‘how soon’ – and the sooner the better for all of us,” IEA Executive Director Fatih Birol said in a statement.

The oil-producing Organization of the Petroleum Exporting Countries, which disagrees with the IEA on its outlook for oil demand growth, said earlier this month that it still expects relatively strong growth in global oil demand for both 2024 and 2025.

Participants are seen at the Innovation Agora of the CERAWeek in Houston, Texas, the United States, on March 18, 2024. CERAWeek, known as a superbowl forum in the global energy industry, kicked off Monday in Houston of the U.S. state of Texas, with topics covering the entire energy spectrum but themed on multidimensional energy transition in four fields: markets, climate, technology and geopolitics.

Xinhua News Agency | Xinhua News Agency | Getty Images

Policymakers have also renewed their focus on energy supply security in the wake of Russia’s full-scale invasion of Ukraine and the Israel-Hamas war.

It is in this context that oil and gas executives have repeatedly sought to fend off climate criticism, claiming that Big Oil is not to blame for the climate crisis and warning that it won’t be possible to keep everyone happy in the shift away from fossil fuels.

The burning of fossil fuels such as coal, oil and gas is the chief driver of the climate crisis.

“It’s no surprise to see misleading claims like this coming at CERAWeek, because fossil fuel companies are the biggest cause of the climate crisis, and their continued political influence is the biggest obstacle to solving it,” David Tong, global industry campaign manager at advocacy group Oil Change International, told CNBC via email.

“Oil and gas companies are deliberately slowing and blocking a rapid fossil fuel phase-out with the types of dangerous distractions they are peddling this week in Houston,” Tong said.

‘There’s really no debate’

Some energy companies have scaled back their greenhouse gas reduction targets in recent months.

Activist investors have put pressure on fossil fuel companies to further align their emission reduction targets with the landmark 2015 Paris Agreement, while some have urged firms to scale back on green pledges and instead lean into their core oil and gas businesses.

“What we are seeing now is a desperate attempt from the oil and gas industry to stay relevant and to double down on their old business model despite knowing the products they’ve sold us for decades are responsible for the climate crisis,” Josh Eisenfeld, corporate accountability campaign manager at Earthworks, an environmental non-profit based in Washington D.C., told CNBC via email.

“They’ve failed to evolve their business into one that is compatible with what science tells us must be done to avoid a climate catastrophe. There’s really no debate — science has made it abundantly clear what needs to be done and paramount to that is a transition away from fossil fuels,” Eisenfeld said. “To think otherwise is delusional,” he added.

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These oil companies could be the next takeover targets in Permian Basin after Diamondback deal

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2024 energy outlook: What investors can expect from crude prices, and how to play it

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Friday’s S&P 500 and Nasdaq-100 rebalance may reflect concerns over concentration risk

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It’s arguably the biggest stock story of 2023: a small number of giant technology companies now make up a very large part of big indexes like the S&P 500 and the Nasdaq-100. 

Five companies (Apple, Microsoft, Amazon, Nvidia and Alphabet) make up about 25% of the S&P 500. Six companies (Apple, Microsoft, Amazon, Nvidia, Alphabet and Broadcom) make up about 40% of the Nasdaq-100. 

The S&P 500 and the Nasdaq are rebalancing their respective indexes this Friday. While this is a routine event, some of the changes may reflect the concerns over concentration risk. 

A ton of money is pegged to a few indexes 

Now that the CPI and the Fed meeting are out of the way, these rebalances are the last major “liquidity events” of the year, corresponding with another notable trading event: triple witching, or the quarterly expiration of stock options, index options and index futures. 

This is an opportunity for the trading community to move large blocks of stock for the last gasps of tax loss harvesting or to position for the new year. Trading volume will typically drop 30%-40% in the final two weeks of the year after triple witching, with only the final trading day showing significant volume.

All of this might appear of only academic interest, but the big move to passive index investing in the past 20 years has made these events more important to investors. 

When these indexes are adjusted, either because of additions or deletions, or because share counts change, or because the weightings are changed to reduce the influence of the largest companies, it means a lot of money moves in and out of mutual funds and ETFs that are directly or indirectly tied to the indexes. 

Standard & Poor’s estimates that nearly $13 trillion is directly or indirectly indexed to the S&P 500. The three largest ETFs (SPDR S&P 500 ETF Trust, iShares Core S&P 500 ETF, and Vanguard S&P 500 ETF) are all directly indexed to the S&P 500 and collectively have nearly $1.2 trillion in assets under management. 

Linked to the Nasdaq-100 — the 100 largest nonfinancial companies listed on Nasdaq — the Invesco QQQ Trust (QQQ) is the fifth-largest ETF, with roughly $220 billion in assets under management. 

S&P 500: Apple and others will be for sale. Uber going in 

For the S&P 500, Standard & Poor’s will adjust the weighting of each stock to account for changes in share count. Share counts typically change because many companies have large buyback programs that reduce share count. 

This quarter, Apple, Alphabet, Comcast, Exxon Mobil, Visa and Marathon Petroleum will all see their share counts reduced, so funds indexed to the S&P will have to reduce their weighting. 

S&P 500: Companies with share count reduction

(% of share count reduction)

  • Apple        0.5%
  • Alphabet   1.3%
  • Comcast    2.4%
  • Exxon Mobil  1.0%
  • Visa                0.8%
  • Marathon Petroleum  2.6%

Source: S&P Global

Other companies (Nasdaq, EQT, and Amazon among them) will see their share counts increased, so funds indexed to the S&P 500 will have to increase their weighting. 

In addition, three companies are being added to the S&P 500: Uber, Jabil, and Builders FirstSource.  I wrote about the effect that being added to the S&P was having on Uber‘s stock price last week.  

Three other companies are being deleted and will go from the S&P 500 to the S&P SmallCap 600 index: Sealed Air, Alaska Air and SolarEdge Technologies. 

Nasdaq-100 changes: DoorDash, MongoDB, Splunk are in 

The Nasdaq-100 is rebalanced four times a year; however, the annual reconstitution, where stocks are added or deleted, happens only in December. 

Last Friday, Nasdaq announced that six companies would be added to the Nasdaq-100: CDW Corporation (CDW), Coca-Cola Europacific Partners (CCEP), DoorDash (DASH), MongoDB (MDB), Roper Technologies (ROP), and Splunk (SPLK). 

Six others will be deleted: Align Technology (ALGN), eBay (EBAY), Enphase Energy (ENPH), JD.com (JD), Lucid Group (LCID), and Zoom Video Communications (ZM).

Concentration risk: The rules

Under federal law, a diversified investment fund (mutual funds, exchange-traded funds), even if it just mimics an index like the S&P 500, has to satisfy certain diversification requirements. This includes requirements that: 1) no single issuer can account for more than 25% of the total assets of the portfolio, and 2) securities that represent more than 5% of the total assets cannot exceed 50% of the total portfolio. 

Most of the major indexes have similar requirements in their rules. 

For example, there are 11 S&P sector indexes that are the underlying indexes for widely traded ETFs such as the Technology Select SPDR ETF (XLK). The rules for these sector indexes are similar to the rules on diversification requirements for investment funds discussed above. For example, the S&P sector indexes say that a single stock cannot exceed 24% of the float-adjusted market capitalization of that sector index and that the sum of the companies with weights greater than 4.8% cannot exceed 50% of the total index weight. 

At the end of last week, three companies had weights greater than 4.8% in the Technology Select Sector (Microsoft at 23.5%, Apple at 22.8%, and Broadcom at 4.9%) and their combined market weight was 51.2%, so if those same prices hold at the close on Friday, there should be a small reduction in Apple and Microsoft in that index. 

S&P will announce if there are changes in the sector indexes after the close on Friday. 

The Nasdaq-100 also uses a “modified” market-capitalization weighting scheme, which can constrain the size of the weighting for any given stock to address overconcentration risk. This rebalancing may reduce the weighting in some of the largest stocks, including Apple, Microsoft, Amazon, Nvidia and Alphabet. 

The move up in these large tech stocks was so rapid in the first half of the year that Nasdaq took the unusual step of initiating a special rebalance in the Nasdaq-100 in July to address the overconcentration of the biggest names. As a result, Microsoft, Apple, Nvidia, Amazon and Tesla all saw their weightings reduced. 

Market concentration is nothing new

Whether the rules around market concentration should be tightened is open for debate, but the issue has been around for decades.

For example, Phil Mackintosh and Robert Jankiewicz from Nasdaq recently noted that the weight of the five largest companies in the S&P 500 was also around 25% back in the 1970s.

Disclosure: Comcast is the corporate parent of NBCUniversal and CNBC.

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The top 10 things to watch in the stock market Wednesday

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The 10 things to watch Wednesday, Dec. 6

1. U.S. stocks are higher in premarket trading Wednesday, with S&P 500 futures up 0.45% after back-to-back days of losses. The move comes amid increasing signs the labor market is loosening, suggesting the Federal Reserve’s interest-rate hikes are succeeding in cooling the economy. U.S. private payrolls rose by 103,000 last month, according to the ADP National Employment Report, well below forecasts for a 130,000 increase.

2. Home builder Toll Brothers (TOL) delivers better-than-expected quarterly results, with revenue of $3.02 billion and earnings-per-share of $4.11 on stronger margins. The company also provides upbeat commentary around 2024, with mortgage rates expected to come down.

3. Bank of America downgrades PayPal (PYPL) to neutral from buy, while lowering its price target to $66 a share, down from $77. The firm doesn’t think PayPal is “broken” but needs time to fix things, calling 2024 a transition year.

4. JPMorgan shuffles around its oil ratings, upgrading Devon Energy (DVN) to overweight from neutral, while downgrading EOG Resources (EOG) to neutral from overweight. The firm also lowers its price target slightly on Club name Coterra Energy (CTRA) to $29 a share, from $30, while reiterating an overweight rating and keeping the stock as a “top pick.”

5. Morgan Stanley downgrades Plug Power (PLUG) to underweight from equal weight, while lowering its price target to $3 a share, down from $3.50. If you want a hydrogen play with less of the risk, stick with Club holding Linde (LIN). It’s the largest supplier of liquid hydrogen in the U.S. and doing a lot for clean hydrogen, too.

6. Morgan Stanley resumes coverage on JM Smucker (SJM) with an equal-weight rating and $122-per-share price target. The firm liked Smucker’s quarterly results but cites “several concerns,” including the company’s acquisition of Hostess Brands and the risk posed by GLP-1 drugs.

7. Bank of America calls semiconductor company Qualcomm (QCOM) a “top pick” amid the end of the global smartphone downturn. The firm expects global smartphone shipments to rise by 5% in 2024.

8. Citi upgrades Signet Jewelers to buy from neutral, while raising its price target to $119 a share, up from $93. You can hear the full story from CEO Gina Drosos on Tuesday’s “Mad Money“. 

 9. Can Club holding Starbucks (SBUX) break a 12-day losing streak now that the bad news is out? CEO Laxman Narasimhan said Tuesday at a Morgan Stanley conference that the recovery in China is “perhaps half the rate of what you would expect it to be given what you saw in the fourth quarter last year.” Shares of the coffeemaker were up 0.5% in early trading, at $96 apiece.

10. Exxon Mobil (XOM) says it plans to repurchase $20 billion worth of stock annually through 2025 after its acquisition of Pioneer Natural Resources (PXD) closes. The oil major is buying back $17.5 billion of stock this year.

(See here for a full list of the stocks at Jim Cramer’s Charitable Trust.)

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Why Exxon and Chevron are doubling down on fossil fuel energy with big acquisitions

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Prices at a Chevron Corp. gas station in Fontana, California, on Thursday, July 8, 2021.

Kyle Grillot | Bloomberg | Getty Images

On Monday, Chevron announced plans to acquire oil and gas company Hess for $53 billion in stock.

Less than two weeks prior, Exxon Mobil announced it is acquiring oil company Pioneer Natural Resources for $59.5 billion in stock.

On Tuesday, the International Energy Agency released its annual world energy outlook report that projects global demand for coal, oil and natural gas will hit an all-time high by 2030, a prediction the IEA’s executive director Fatih Birol had telegraphed in September.

“The transition to clean energy is happening worldwide and it’s unstoppable. It’s not a question of ‘if,’ it’s just a matter of ‘how soon’ — and the sooner the better for all of us,” Birol said in a written statement published alongside his agency’s world outlook. “Taking into account the ongoing strains and volatility in traditional energy markets today, claims that oil and gas represent safe or secure choices for the world’s energy and climate future look weaker than ever.”

But based on their acquisitions, Chevron and Exxon are seemingly preparing for a different world than the IEA is portending.

“The large companies — nongovernment companies — do not see an end to oil demand any time in the near future. That’s one of the messages you have to take from this. They are committed to the industry, to production, to reserves and to spending,” Larry J. Goldstein, a former president of the Petroleum Industry Research Foundation and a trustee with the not-for-profit Energy Policy Research Foundation, told CNBC in a phone conversation Monday.

“They’re in this in the long haul. They don’t see oil demand declining anytime in the near term. And they see oil demand in fairly large volumes existing for at least the next 20, 25 years,” Goldstein told CNBC. “There’s a major difference between what the big oil companies believe the future of oil is and the governments around the world.”

So, too, says Ben Cahill, a senior fellow in the energy security and climate change program at the bipartisan, nonprofit policy research organization, Center for Strategic and International Studies.

“There are endless debates about when ‘peak demand’ will occur, but at the moment, global oil consumption is near an all-time high. The largest oil and gas producers in the United States see a long pathway for oil demand,” Cahill told CNBC.

Pioneer Natural Resources crude oil storage tanks near Midland, Texas, on Oct. 11, 2023.

Bloomberg | Bloomberg | Getty Images

Africa, Asia driving demand

Globally, momentum behind and investment in clean energy is increasing. In 2023, there will be $2.8 trillion invested in the global energy markets, according to a prediction from the IEA in May, and $1.7 trillion of that is expected to be in clean technologies, the IEA said.

The remainder, a bit more than $1 trillion, will go into fossil fuels, such as coal, gas and oil, the IEA said.

Continued demand for oil and gas despite growing momentum in clean energy is due to population growth around the globe and in particular, growth of populations “ascending the socioeconomic ladder” in Africa, Asia and to some extent Latin America, according to Shon Hiatt, director of the Business of Energy Transition Initiative at the USC Marshall School of Business.

Oil and gas are relatively cheap and easy to move around, particularly in comparison with building new clean energy infrastructure.

“These companies believe in the long-term viability of the oil and gas industry because hydrocarbons remain the most cost-effective and easily transportable and storable energy source,” Hiatt told CNBC. “Their strategy suggests that in emerging economies marked by population and economic expansion, the adoption of low-carbon energy sources may be prohibitively expensive, while hydrocarbon demand in European and North American markets, although potentially reduced, will remain a significant factor.”

Also, while electric vehicles are growing in popularity, they are just one section of the transportation pie, and many of the other sections of the transportation sector will continue to use fossil fuels, said Marianne Kah, senior research scholar and board member at Columbia University’s Center on Global Energy Policy. Kah was previously the chief economist of ConocoPhillips for 25 years.

“While there is a lot of media attention given to the increasing penetration of electric passenger vehicles, global oil demand is still expected to grow in the petrochemical, aviation and heavy-duty trucking sectors,” Kah told CNBC.

Geopolitical pressures also play a role.

Exxon and Chevron are expanding their holdings as European oil and gas majors are more likely to be subject to strict emissions regulations. The U.S. is unlikely to have the political will to force the same kind of stringent regulations on oil and gas companies here.

“One might speculate that Exxon and Chevron are anticipating the European oil majors divesting their global reserves over the next decade due to European policy changes,” Hiatt told CNBC.

“They are also betting domestic politics will not allow the U.S. to take significant new climate policies directed specifically to restrain or limit or ban the level of U.S. oil and gas domestic production,” Amy Myers Jaffe, a research professor at New York University and director of the Energy, Climate Justice and Sustainability Lab at NYU’s School of Professional Studies, told CNBC. 

Goldstein expects the ever-expanding U.S. national debt will eventually put all kinds of government subsidies on the chopping block, which he says will also benefit companies such as Exxon and Chevron.

“All subsidies will be under enormous pressure,” Goldstein said, the intensity of that pressure dependent on which party is in the White House at any given time. “By the way, that means the large financial oil companies will be able to weather that environment better than the smaller companies.”

Also, sanctions of state-controlled oil and gas companies in countries like those in Russia, Venezuela and Iran are providing Exxon and Chevron a geopolitical opening, Jaffe said.

“They likely hope that any geopolitically driven market shortfalls to come can be filled by their own production, even if demand for oil overall is reduced through decarbonization policies around the world,” Jaffe told CNBC. “If you imagine oil like the game of musical chairs, Exxon Mobil and Chevron are betting that other countries will fall out of the game regardless of the number of chairs and that there will be enough chairs left for the American firms to sit down, each time the music stops.”

An oil pumpjack pulls oil from the Permian Basin oil field in Odessa, Texas, on March 14, 2022.

Joe Raedle | Getty Images News | Getty Images

Oil that can be tapped quickly is a priority

Known oil reserves are increasingly valuable as European and American governments look to limit the exploration for new oil and gas reserves, according to Hiatt.

“Notably, both Pioneer and Hess possess attractive, well-established oil and gas reserves that offer the potential for significant expansion and diversification for Exxon and Chevron,” Hiatt told CNBC.

Oil and gas reserves that can be brought to market relatively quickly “are the ideal candidates for production when there is uncertainty about the pace of the energy transition,” Kah told CNBC, which explains Exxon’s acquisition of Pioneer, which gave Exxon more access to “tight oil,” or oil found in shale rock, in the Permian basin.

Shale is a kind of porous rock that can hold natural gas and oil. It’s accessed with hydraulic fracking, which involves shooting water mixed with sand into the ground to release the fossil fuel reserves held therein. Hydrocarbon reserves found in shale can be brought to market between six months and a year, where exploring for new reserves in offshore deep water can take five to seven years to tap, Jaffe told CNBC.

“Chevron and Exxon Mobil are looking to reduce their costs and lower execution risk through increasing the share of short cycle U.S. shale reserves in their portfolio,” Jaffe said. Having reserves that are easier to bring to market gives oil and gas companies increased ability to be responsive to swings in the price of oil and gas. “That flexibility is attractive in today’s volatile price climate,” Jaffe told CNBC.

Chevron’s purchase of Hess also gives Chevron access in Guyana, a country in South America, which Jaffe also says is desirable because it is “a low cost, close to home prolific production region.”

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What tie-ups in the U.S. oil patch could mean for players like Coterra Energy

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Permian Basin rigs in 2020, when U.S. crude oil production dropped by 3 million a day as Wall Street pressure forced cuts.

Paul Ratje | Afp | Getty Images

Exxon Mobil‘s (XOM) planned deal to buy Pioneer Natural Resources (PXD) has sparked talk of more consolidation in the oil-and-gas industry. While we don’t own companies as mergers-and-acquisition plays, the potential for more tie-ups could have significant implications for our remaining oil name: Coterra Energy (CTRA).

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Top Wall Street analysts expect these dividend stocks to boost portfolio returns

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A logo of the Exxon Mobil Corp is seen at the Rio Oil and Gas Expo and Conference in Rio de Janeiro, Brazil September 24, 2018.

Sergio Moraes | Reuters

Dividend-paying stocks are looking even more attractive as investors grapple with a spike in bond yields and a tumultuous stock market.

With that in mind, here are five attractive dividend stocks, according to Wall Street’s top experts on TipRanks, a platform that ranks analysts based on their past performance.

Exxon Mobil

First on this week’s list is dividend aristocrat Exxon Mobil (XOM). The energy giant offers a yield of 3.4%. The company’s dividend hike of 3.4% last year marked the 40th consecutive year of annual dividend growth. Exxon’s dividends are backed by solid earnings and cash flows.

In the second quarter, the company distributed $8 billion to shareholders through share repurchases of $4.3 billion and dividends of $3.7 billion. It generated free cash flow of $5 billion in the June quarter.

Mizuho analyst Nitin Kumar reiterated a buy rating on Exxon with a price target of $139 after attending the company’s Product Solutions Spotlight event. The analyst said that the company is on track to meet its target of boosting its product solutions earnings by $10 billion by 2027 compared to $6 billion reported in 2019.

“With 1H23 annualized earnings at $11.5 billion, the company is halfway through that target, with most of the benefit to date from cost reductions,” noted Kumar.

He expects key strategic projects that have recently commenced, like Beaumont crude expansion and chemical expansions at Baytown, and major projects planned for 2024 to 2027, such as the Singapore Resid upgrade project, to help Exxon deliver most of the targeted improvement in earnings by 2027.

Kumar ranks No.67 among more than 8,500 analysts tracked by TipRanks. His ratings have been profitable 71% of the time, with each delivering a return of 19.8%, on average. (See Exxon Insider Trading Activity on TipRanks)

Coterra Energy

Kumar is also bullish on Coterra Energy (CTRA), an oil and gas exploration and production company with major operations in the Permian Basin, Marcellus Shale and Anadarko Basin. Earlier this year, the company increased its annual base dividend by 33% to 80 cents per share.

The company’s shareholder return strategy is to distribute 50% of its free cash flow via base dividends, share repurchases and variable dividends. CTRA realigned its return strategy for 2023 to give importance to buybacks over variable dividends. In the first six months of 2023, it paid $303 million through dividends and made share repurchases worth $325 million, with the total shareholder return representing 94% of free cash flow.

Last month, Kumar hosted investor meetings with CTRA’s management and said the key takeaway was that the company is confident about delivering solid returns on investment in most commodity price scenarios. In particular, management highlighted the flexibility and optionality of CTRA’s asset base and capital allocation strategy.

“In our opinion, the common thread between their choices is the potential to outperform the three-year (2023-25) plan that calls for ~5%+ oil growth for ~$2.0-2.1bn of total capex – either through less capex or more volumes – but without a degradation of capital efficiencies,” said Kumar.

Calling CTRA his top pick, Kumar reiterated a buy rating on the stock with a price target of $42. (See Coterra Financial Statements on TipRanks)

Brookfield Infrastructure Partners

Next on this week’s dividend list is Brookfield Infrastructure (BIP), which operates assets in the utilities, transport, midstream, and data sectors. BIP paid a quarterly dividend of $0.3825 per unit on Sept. 29, which reflects a 6% year-over-year increase in its distribution. The company offers a dividend yield of 5.5%.

At an investor day event held last month, management discussed its goal to deliver more than 12% growth in funds from its operations per unit as part of its 1- to 3-year outlook.

RBC Capital analyst Robert Kwan, who ranks 194th out of over 8,500 analysts tracked on TipRanks, noted that the company’s targeted FFO/unit growth is expected to be partially driven by its significant organic capital backlog, mainly in the data center business.

The analyst also thinks that given the capital constraints in the current backdrop due to a slowdown in fundraising activity, an entity like Brookfield has the potential to enhance returns by investing capital above its 12% to 15% equity internal rate of return (IRR) target range.   

“We believe that the unit price weakness is an attractive entry point based on a 5% current distribution yield with potential for double-digit underlying FFO/unit growth,” said Kwan.

Kwan reaffirmed a buy rating on BIP stock with a price target of $45. His ratings have been profitable 64% of the time, with each delivering an average return of 10.8%. (See BIP Stock Chart on TipRanks)

American Electric Power

Another RBC Capital analyst, Shelby Tucker, is bullish on utility stock American Electric Power (AEP). On Oct. 2, the company named Charles E. Zebula as its new chief financial officer and reaffirmed its 2023 operating earnings outlook of $5.19 to $5.39 per share and long-term operating earnings growth rate of 6% to 7%.

AEP paid a quarterly dividend of 83 cents per share on Sept. 8, its 453rd consecutive quarterly cash dividend. It offers a dividend yield of 4.6%.

Recently, Tucker lowered the price target for AEP to $90 from $103 to reflect a high interest environment but reiterated a buy rating. The analyst said that the stock remains one of the firm’s top picks in 2023 and one of the best-in-class utilities.

The analyst thinks that AEP’s $40 billion regulated capital spending plan, focusing on transmission deployment, offers strong resiliency against a challenging macro backdrop and cost inflation. Tucker also expects the company to benefit from the incentives under the Inflation Reduction Act.  

“We believe AEP deserves a slight premium on valuations from rapid decarbonization of its generation fleet and robust investments in regulated renewable,” the analyst said.

Tucker holds the 367th position among more than 8,500 analysts on TipRanks. Moreover, 61% of his ratings have been profitable, with each generating an average return of 8.1%. (See AEP Blogger Opinions & Sentiment on TipRanks) 

Darden Restaurants

Darden Restaurants (DRI), the owner of Olive Garden and other popular brands, delivered better-than-anticipated fiscal first-quarter results, despite the pullback in consumer spending affecting the company’s fine dining segment.   

The company paid $159 million in dividends and deployed about $143 million toward share repurchases in the fiscal first quarter. With a quarterly dividend of $1.31 per share (annualized dividend of $5.24), DRI stock’s dividend yield is 3.7%.       

Following the results, JPMorgan analyst John Ivankoe reiterated a buy rating on DRI stock but lowered the price target to $174 from $176.

The analyst noted that the company’s same-store sales growth of 5% surpassed his estimate of 4.4%, with its Olive Garden and LongHorn Steakhouse chains offsetting the softness in fine dining. Also, DRI’s same-store sales growth outperformed the industry average of 0.9%.       

“Finally, the 10%+ TSR [total shareholder return] (EPS + annual dividend yield) remains intact for F24/25,” said Ivankoe.  

Ivankoe holds the 854th position among more than 8,500 analysts tracked on TipRanks. Moreover, 60% of his ratings have been profitable, with each generating an average return of 7.1%. (See DRI Hedge Fund Trading Activity on TipRanks)

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Oil and natural gas prices are on different paths. Here’s what has been driving the moves

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Oil prices eased in Asian as concerns over slow demand from top crude importer China grew after bearish trade and inflation data, outweighing fears over tighter supply arising from output cuts by Saudi Arabia and Russia.

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Oil prices are at 10-month highs. Here’s what Cramer thinks it means for two energy stocks

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An oil pump jack in Great Plains, southeastern Wyoming.

Marli Miller | Universal Images Group | Getty Images

Oil prices are hovering around 10-month highs, as a stout summer rally extends into the fall and delivers additional gains for the Club’s energy stocks, Pioneer Natural Resources (PXD) and Coterra Energy (CTRA). And Jim Cramer believes it’s not too late to buy either of them.

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