The Magnificent 7 Earnings: How to Position Your Portfolio

Posted on by The INO.com Team

As earnings season ramps up, investors closely watch the “Magnificent Seven,” a group of high-profile tech companies that play a pivotal role in market dynamics. This week, three of these tech giants—Amazon.com, Inc. (AMZN), Apple Inc. (AAPL), and Meta Platforms, Inc. (META)—are set to report their quarterly earnings.

On July 30, the Nasdaq Composite declined sharply ahead of Microsoft Corporation (MSFT) earnings. Microsoft shares fell nearly 7% in extended trading on Tuesday as disappointing cloud results overshadowed better-than-expected revenue and earnings.

For the fourth quarter that ended June 30, 2024, MSFT’s revenue increased 15% year-over-year to $64.70 billion. That slightly surpassed the consensus revenue estimate of $64.44 billion. The company’s top segment, Intelligent Cloud, which includes its Azure services, reported $28.52 billion in revenue. It was up around 19% but fell short of analysts’ expectations of $28.68 billion.

Microsoft’s cloud business holds significant importance for Wall Street, as the company competes with Amazon Web Services and Google for AI workloads. All three firms heavily invest in enhancing AI capabilities, aiming to attract startups and large corporations as generative AI models advance rapidly.

In addition, MSFT posted fourth-quarter net income and earnings per share of $22 billion and $2.95, up 10% year-over-year. That compared to analysts’ EPS estimate of $2.94.

Mega-cap tech stocks had surged tremendously on high hopes for growth driven by artificial intelligence (AI). The upcoming earnings reports from major tech giants, including AMZN, AAPL, and META, will have far-reaching implications for the market. Positive results could reinvigorate confidence in Big Tech, while disappointing numbers might accelerate the shift to underperforming sectors like mid- and small-cap stocks.

Moreover, the earnings season coincides with a pivotal Federal Reserve meeting. Fed officials are expected to hold rates steady but may signal a potential rate cut in September following better news on inflation and signs the labor market is cooling. This decision will add another layer of complexity to market dynamics, influencing investor sentiment and market movements.

Key Earnings Reports: What to Watch For

Amazon.com, Inc. (AMZN)

With a $1.89 trillion market cap, Amazon.com, Inc. (AMZN) engages in the retail sale of consumer products, advertising, and subscription services via online and physical stores. The company operates through North America, International, and Amazon Web Services (AWS) segments.

Amazon’s second-quarter earnings, scheduled to be released on August 1, will shed light on consumer spending and enterprise cloud adoption. Investors will be keen to see how AWS is performing, as it is a significant revenue driver for the company. In the last reported first quarter, AWS segment sales rose 17% year-over-year to $25 billion.

“The combination of companies renewing their infrastructure modernization efforts and the appeal of AWS’s AI capabilities is reaccelerating AWS’s growth rate (now at a $100 billion annual revenue run rate); our Stores business continues to expand selection, provide everyday low prices, and accelerate delivery speed (setting another record on speed for Prime customers in Q1) while lowering our cost to serve; and, our Advertising efforts continue to benefit from the growth of our Stores and Prime Video businesses,” said Andy Jassy, AMZN’s President and CEO in first-quarter earnings release.

“It’s very early days in all of our businesses and we remain excited by how much more we can make customers’ lives better and easier moving forward,” Jassy added.

For the second quarter 2024 guidance, the tech giant’s net sales are expected to be between $144 billion and $149 billion, or grow between 7% and 11% compared to the second quarter of 2023. AMZN’s operating income is anticipated to be between $10 billion and $14 billion, compared with $7.7 billion in the second quarter of 2023.

Notably, on July 18, Amazon announced record-breaking sales for the 2024 Prime Day shopping event. During the 48-hour event, Prime members shopped millions of deals with over 35 categories and purchased more items than any prior Prime Day shopping event. Rufus, the company’s new AI-powered conversational shopping assistant, has assisted millions of customers quickly and easily navigating Amazon’s extensive selection.

Analysts appear bullish about the e-commerce giant’s prospects. Street expects AMZN’s revenue and EPS for the second quarter (ended June 2024) to increase 10.6% and 56.9% to $148.62 billion and $1.02, respectively. Moreover, the company topped consensus revenue and EPS estimates in all four trailing quarters, which is remarkable.

Shares of AMZN have surged about 14% over the past six months and more than 19% year-to-date. However, the stock has plunged around 6% over the past month.

Solid AWS growth in the second quarter and resilient consumer spending might justify increasing exposure to Amazon. However, slowing growth or rising costs could suggest reducing positions or hedging.

Apple Inc. (AAPL)

Apple Inc. (AAPL), valued at a $3.36 trillion market cap, is a global leader in consumer electronics, software, and services. Apple is renowned for its innovative products, including the iPhone, its flagship product which accounts for a significant portion of the company’s revenue, Mac computers, iPad, Apple Watch, AirPods, and services like the App Store, Apple Music, iCloud, and more.

AAPL’s third-quarter earnings, scheduled for August 1, will reflect the performance of its key product lines. For the second quarter that ended March 30, 2024, the company posted revenue of $90.75 billion, down 4% year-over-year. However, the revenue surpassed analysts’ estimate of $90.45 billion. Also, iPhone sales fell 10% year-over-year during the quarter. The company realized $5 billion in delayed iPhone 14 sales from Covid-based supply issues.

Furthermore, the company’s net income was $23.64 billion for the third quarter, down 2% from the prior year’s quarter. Apple reported quarterly earnings per share of $1.53, compared to the consensus estimate of $1.51.

In the last quarter, the company announced that its Board of Directors authorized $110 billion in share repurchases, an impressive 22% rise from last year’s $90 billion share authorization. It’s the largest buyback in the company’s history.

Apple did not offer formal guidance, but CEO Tim Cook told CNBC’s Steve Kovach that overall sales are expected to grow in the “low single digits” for the June quarter.

During an earnings call with analysts, AAPL CFO Luca Maestri indicated that the company will deliver double-digit year-over-year growth in iPad sales for the to-be-reported quarter. Additionally, he noted that the Services division is projected to continue growing at the current high rate observed over the past two quarters.

Analysts expect AAPL’s revenue and EPS for the third quarter to increase 3.2% and 6.5% to $84.38 billion and $1.34, respectively. Additionally, Apple surpassed consensus EPS estimates in each of the trailing four quarters.

Over the past month, AAPL’s stock has soared more than 2.5%. Further, the stock climbed approximately 16% over the past six months and around 13% year-to-date. Robust sales across key product lines could indicate solid consumer demand, driving Apple’s shares. However, updates on supply chain challenges and mitigation strategies will be crucial in the upcoming earnings report.

Meta Platforms (META)

With a market cap of $1.18 trillion, Meta Platforms, Inc. (META), formerly known as Facebook, Inc., is a tech conglomerate with key products, such as Facebook, Instagram, WhatsApp, and Messenger. It operates in two segments: Family of Apps and Reality Labs.

META is expected to report its second-quarter 2024 earnings on July 31 after the market closes. Meta’s first-quarter revenue was $36.46 billion, compared to the consensus estimate of $36.22 billion. Its revenue was up 27.3% year-over-year. The company’s ad impressions delivered across its Family of Apps grew by 20% year-over-year, and the average price per ad grew by 6%.

Further, the company reported an EPS of $4.71 for the March quarter, exceeding analysts’ expectations of $4.36 and being up 114% year over year.

Meta Platforms no longer provide data on daily active users (DAUs) and monthly active users (MAUs). Instead, it reports a consolidated figure called family daily active people (DAP). DAP was 3.24 billion on average for March, an increase of 7% year-over-year.

In the last earnings release, Meta’s founder and CEO, Mark Zuckerberg, said, “It's been a good start to the year. The new version of Meta AI with Llama 3 is another step towards building the world's leading AI. We're seeing healthy growth across our apps and we continue making steady progress building the metaverse as well.”

In April, META announced the latest version of Meta AI with Llama 3, one of the world’s leading AI assistants. This version is free and readily available in several countries. Meta AI is available across its apps, including Facebook, Instagram, WhatsApp, and Messenger, to get things done, learn, create, and access real-time information. The new advances in Meta AI with Llama 3 are expected to extend META’s market reach and boost its profitability.

For the second quarter of 2024, META expects sales between $36.50 billion to $39 billion. The midpoint of the range, $37.75 billion, will represent nearly 18% year-over-year growth. Meanwhile, analysts anticipate the company’s revenue for the June quarter to increase 19.7% year-over-year to $38.31 billion, and the consensus EPS estimate of $4.78 indicates an improvement of 60.5% year-over-year.

Meta has raised investor expectations due to its improved financial performance in recent quarters, leaving little room for error. The stock is up about 2% over the past five days and nearly 30% year-to-date. In February 2023, META CEO Mark Zuckerberg announced it would be the “year of efficiency,” which sparked the rally.

At that time, Zuckerberg stated that the company would focus on eliminating unnecessary projects and reducing bloat, aiming to transform Meta into a “stronger and more nimble organization.” Consequently, the company cut about 21,000 jobs in the first half of 2023, with Zuckerberg indicating in February this year that hiring would be “relatively minimal compared to historical levels.”

The headcount decreased by 10% in the first quarter of 2024 compared to the previous year, bringing it down to 69,329 employees.

Meta’s capital expenditures for fiscal 2024 are projected to be between $35 billion and $40 billion, up from a prior forecast of $30 billion to $37 billion. This increase is attributed to accelerated infrastructure investments to support the company’s artificial intelligence (AI) roadmap, META said.

Bottom Line

As earnings reports from tech giants, including META, AAPL, and AMZN, approach, investors should prepare for potential market shifts. Investors can better position their portfolios by closely monitoring these results and considering broader economic signals, such as the Federal Reserve’s actions. A balanced approach with diversification, sector rotation, and hedging can help manage risks and capitalize on opportunities in this critical earnings season.

Small-Cap Stocks on the Rise: The Hidden Gems of the Market

Posted on by The INO.com Team

Last week, U.S. equities had a roller-coaster ride as investors grappled with a sharp selloff in big-tech stocks, which led to a rotation into small-cap and value stocks. This significant shift from large-cap to small-cap stocks has been dubbed the “Great Rotation.”

Just a month ago, small-cap stocks were making headlines for their poor performance compared to their large-cap counterparts. The Russell 2000 Index of small-cap stocks had been stuck in a rut for years. Over the past decade, it has underperformed the S&P 500 by 103% and the Nasdaq 100 by an eye-watering 332%. This ten-year stretch of underperformance was one of the worst for small caps compared to large caps in a century. As we reached the midpoint of 2024, the Russell 2000 was barely positive for the year, while the S&P 500 had posted a 15% gain thanks to the stellar performance of the Magnificent Seven.

However, on July 11, small-cap stocks made a comeback after the June consumer price index (CPI) report indicated a further easing of inflation and raised hopes for a September Fed rate cut. This news sparked a major rotation into small-cap stocks, which benefit from lower interest rates due to their higher borrowing costs.

The Russell 2000 surged by 3.6% when the CPI numbers were released. Political developments over the following days also contributed, increasing market optimism for a more deregulatory environment in 2025, depending on the U.S. presidential election results. Since July 11, small-cap stocks have risen over 7%, while large-cap stocks have declined by 3%.

However, the momentum of this trend may hinge on the July Federal Open Market Committee (FOMC) meeting. Although the Fed is not expected to cut interest rates at this meeting, investors will watch closely for any hints about future rate cuts. Interest rate changes significantly impact different sectors of the economy, and small-cap companies, which rely more on business loans, are particularly sensitive to these shifts.

“People typically believe that when you get rate cuts, that benefits small caps in a couple of ways,” said Thomas Martin, senior portfolio manager at Globalt Investments. Lower interest rates can reduce operating expenses for small companies, boosting their earnings. Additionally, lower rates can stimulate the economy, increasing consumer spending.

If the Fed signals a mild economic slowdown, it could help curb inflation. However, a sharp slowdown might raise recession risks, especially for small-cap companies, which are more exposed to economic downturns than large-caps. Analysts warn that achieving a soft landing will be challenging, as small labor market and economy cracks could lead to more significant issues.

Investors are closely watching these developments, as worsening conditions could adversely affect small-cap stocks. Both the Fed and small-caps have been walking a tightrope toward a soft landing. Achieving this would be ideal, but it's a big "if."

Despite the uncertainty, we believe that an allocation to small-cap equities is still sensible today. After a particularly volatile week, the Russell 2000 has risen by 3.5%, while the S&P 500 dropped by 0.8%. Disappointing earnings from some of the mega-cap names may potentially widen the gap between these two benchmarks.

Moreover, investors have already begun shifting from mega-cap to small-cap stocks in anticipation of future rate cuts by the Federal Reserve, suggesting that small caps could gain even more traction when the Fed eventually lowers rates.

In light of this, let’s discuss the prospects of iShares Russell 2000 ETF (IWM) and iShares Core S&P Small-Cap ETF (IJR). These ETFs offer broad exposure to various dynamic and fast-growing economies and industries.

iShares Russell 2000 ETF (IWM)

Managed by BlackRock, Inc., IWM focuses on the small-cap segment and has assets under management (AUM) of $72.21 billion. The fund’s top holdings include Insmed Incorporated (INSM), which has a 0.43% weighting. FTAI Aviation Ltd. (FTAI) is next at 0.42%, followed by U.S. Dollar and Vaxcyte, Inc. (PCVX) at 0.35% and 0.34%, respectively.

It has a total of 1976 holdings, with its top 10 assets comprising 3.35% of its AUM. IWM’s expense ratio is 0.19%, lower than the category average of 0.59%. Over the past month, its fund inflows were $7.07 billion.

The fund pays an annual dividend of $2.65, translating to a 1.18% yield at the prevailing price level. Its dividend payouts have grown at an 11.6% CAGR over the past three years.

Over the past nine months, IWM has gained 35.1% to close the last trading session at $221.73. It has also gained 10.5% year-to-date. The fund’s NAV was $221.67 as of Jul 29, 2024.

iShares Core S&P Small-Cap ETF (IJR)

With $84.61 billion in AUM, IJR also focuses on small-cap stocks. Its top holdings include U.S. Dollar at 1.61%, ATI Inc. (ATI) at 0.63%, followed by The Ensign Group, Inc. (ENSG) and Mueller Industries, Inc. (MLI), at 0.62% and 0.61%, respectively. The ETF has 605 holdings, with its top 10 assets comprising 6.82% of its AUM.

The fund's expense ratio is 0.06%, lower than the category average of 0.59%. IJR fund inflows were $1.01 billion over the past month and $3.66 billion over the past year.

IJR pays an annual dividend of $1.45, which translates to a 1.23% yield at the current price level. Moreover, the fund’s dividend payouts have increased at CAGRs of 11.3% and 5.4% over the past three and five years, respectively.

IJR has gained 32.2% over the past nine months and 8.1% year-to-date to close the last trading session at $116.99. The fund’s NAV was $116.89 as of July 29, 2024.

 

Canadian Wildfires: A Short-Term Lifeline for Oil Prices & Opportunity?

Posted on by The INO.com Team

The ongoing wildfires across western Canada, particularly in Alberta, have introduced a temporary yet significant factor in the dynamics of oil prices. As flames force evacuations and disrupt production in one of the world’s largest oil companies, there’s a noticeable ripple effect on the global oil market. This situation presents an immediate impact on Canadian oil production and infrastructure.

Canadian Wildfires and Oil Prices: A Temporary Boost

Wildfires continue to rage across Alberta, threatening additional crude oil production and prompting evacuation alerts. British Columbia is currently battling 433 active wildfires, and there are 176 active wildfires in Alberta, including more than a dozen in the Fort McMurray region, Canada’s biggest oil sands production hub.

On July 16, Suncor Energy Inc. (SU), one of Canada’s largest oil producers, curtailed operations and evacuated nonessential workers due to a 200,000-acre blaze from its 215,000 bpd Firebag site because of a nearby fire. Also, this week, Imperial Oil announced plans to evacuate non-essential personnel from its 275,000 bpd Kearl oil sand site, nearly 70 km north of Fort McMurray in northern Alberta. Firebag and Kearl sites together produce over 500,000 barrels of oil per day.

Approximately two-thirds of Canada’s daily oil production, totaling five million barrels, comes from the oil sands region. The escalating wildfire crisis is raising alarms among analysts about significant oil production cuts.

“While wildfires have already forced some producers to curtail production, these fires still threaten a large amount of supply,” ING Group analysts stated in a research note.

In the short term, the wildfires create a tighter oil supply, which can lead to higher prices. It is particularly relevant in a global market already sensitive to geopolitical tensions and supply chain disruptions.

Amis this backdrop, Suncor Energy Inc. (SU) and Canadian Natural Resources Limited (CNQ), with their solid balance sheets, diversified operations, commitment to offering greater value to shareholders, and recovery potential, stand out as promising investments amid the current challenges posed by Canadian wildfires.

These companies’ ability to adapt and thrive in the face of adversity underscores their potential for sustained growth and stability in the evolving energy landscape. Let’s discuss SU and CNQ’s fundamentals and growth prospects in detail.

Suncor Energy Inc. (SU)

Suncor Energy Inc. (SU) is Canada’s leading integrated energy company, with operations that include oil sands development, production, and upgrading; offshore oil production; petroleum refining; and its Petro-CanadaTM retail and wholesale distribution networks. SU’s diversified operations and strong balance sheet cushion against volatile market conditions.

Notably, SU pays a generous dividend to its shareholders. On June 25, the company’s Board of Directors paid a quarterly dividend of $0.545 per share on its common shares to shareholders of record at the close of business on June 4. Suncor Energy pays an annual dividend of $1.59, which translates to a yield of 4.17% at the current share price.

Moreover, the energy company’s dividend payouts have increased at an impressive CAGR of 33.8% over the past three years. SU has raised its dividends for three consecutive years. During the first quarter of 2024, the company returned $1 billion to shareholders via $700 million in dividends and $300 million in share repurchases.

For the first quarter that ended March 31, 2024, SU reported record upstream production of 835,000 barrels per day (bbls/d), up 12.6% year-over-year. Upstream included Oil Sands bitumen production of 932,100 bbls/d, compared to 811,300 bbls/d in the previous year’s quarter, mainly due to higher absolute bitumen production at Fort Hills and Oil Sands operations including record Firebag production.

The company’s refined product sales were a record 581,000 bbls/d in the first quarter, an increase of 12.9% year-over-year, driven by solid refinery production and SU leveraging its extensive domestic sales network and export channels, as well as the impact of restart activities at the company’s Commerce City refinery in the prior year’s quarter.

As of March 31, 2024, Suncor’s net debt was $13.49 billion, a decline of $193 million compared to December 31, 2023, and $2.23 billion versus March 31, 2023.

In addition, SU’s adjusted operating earnings were $1.82 billion, or $1.41 per common share, compared to $1.81 billion, or $1.36 per common share, respectively, primarily due to increased Oil Sands sales volumes and refinery production in Refining and Marketing (R&M). Moreover, its adjusted funds from operations came in at $3.17 billion and $2.46 per share, up 5.6% and 8.8% year-over-year, respectively.

Regarding SU’s robust operational and financial results, Rich Kruger, the company’s President and CEO, said, "Our strong 2024 first quarter performance continued to build on the momentum established in the second half of 2023, with our workforce safely and cost-effectively delivering record high volumes and reliability across the board, upstream and downstream.”

"Our determination to consistently achieve the highest levels of performance starts with a top-to-bottom focus on the fundamentals of safety, reliability, and profitability and continues with a sense of accountability to deliver on our commitments,” Kruger added.

Wall Street appears bullish about SU’s prospects in the upcoming quarters. Analysts expect Suncor’s revenue and EPS for the fiscal year (ended June 2024) to increase 3.3% and 13.1% year-over-year to $8.96 billion and $0.80, respectively. Also, the company has topped the consensus EPS estimates in all four trailing quarters, which is impressive.

Shares of SU have surged more than 20% over the past six months and nearly 19% year-to-date.

Canadian Natural Resources Limited (CNQ)

Canadian Natural Resources Limited (CNQ) is a senior crude oil and natural gas production company with operations in its core areas located in Western Canada, the United Kingdom portion of the North Sea, and Offshore Africa. The company’s operational flexibility and robust financial health make it a buy, even amid the ongoing wildfires.

During its 35 years of operations, Canadian Natural delivered significant value to its shareholders. The company has a solid history of increasing its sustainable dividend for 24 consecutive years, with a CAGR of around 21% over that time. Moreover, commencing in 2024, CNQ is returning 100% of free cash flow to its shareholders.

In the first quarter of 2024, Canadian Natural’s returns to shareholders totaled $1.70 billion, comprised of $1.1 billion of dividends and $0.6 billion through share repurchases. After last quarter’s end, the company announced a quarterly cash dividend on its common shares of $1.05 per share on a pre-stock split basis, or $0.525 per share post a two-for-one share split. The quarterly dividend was paid on July 5 to shareholders of record as of the close of business on June 17, 2024.

As previously announced in February, CNQ’s Board raised the quarterly dividend by 5% to $1.05 per common share. This reflects the Board of Directors’ confidence in the sustainability of the company’s business model, the robustness of its balance sheet, and the strength of its diverse, long-life, low-decline reserves and asset base.

Canadian Natural continues to focus on safe and efficient operations. In the quarter that ended March 31, 2024, the company delivered an average production of 1,333,502 BOE/d, comprising total liquids production of 975,668 bbl/d and natural gas production of 2,147 MMcf/d.

Further, CNQ’s first-quarter adjusted net earnings from operations were $1.47 billion, or $1.37 per common share, respectively. Its cash flows from operating activities rose 121.5% year-over-year to $2.87 billion, and cash flows from investing activities were $1.39 billion, up 20.7% from the prior year’s quarter. Also, the company’s adjusted funds flow for the quarter was nearly $3.10 billion.

The company also maintains a robust balance sheet and financial flexibility, with approximately $6.80 billion in liquidity as of March 31, 2024.

Additionally, Canadian Natural targets solid production from its Oil Sands Mining and Upgrading assets in the second half of 2024. This goal will be supported by optimizing turnaround activity, completing final tie-ins, and advancing the commissioning of the reliability enhancement project in Q2 2024.

CNQ’s 2024 development plan strategically schedules conventional activity for the year's second half to better align with increased market egress and improved crude oil pricing, thereby maximizing value for its shareholders. Once the Trans Mountain Expansion (TMX) pipeline is completed, there will be ample egress and optionality for its crude oil products.

Street expects CNQ’s revenue for the second quarter (ended June 2024) to increase 5% year-over-year to $6.20 billion. The consensus EPS estimate of $0.58 for the same period indicates an improvement of 35.4% year-over-year. Moreover, the company has surpassed consensus EPS estimates in three of the trailing four quarters.

CNQ’s stock has surged more than 6% over the past six months and nearly 14% over the past year.

Natural Gas Prices Plummet: Opportunities and Risks for Investors

Posted on by The INO.com Team

So far this year, natural gas prices have plummeted to record lows, driven by record-high production, mild winter weather, and a resulting surplus. Between January and June, the average price at the Henry Hub benchmark fell 20% to $2.56 per million British thermal units (MMBtu), hitting their lowest levels since 1997. These price declines have created a volatile market, presenting both risks and opportunities for investors.

The energy sector faces a mix of challenges and prospects. U.S. production has slightly decreased since peaking at 106 billion cubic feet per day in late 2023, but the current inventory levels remain high, keeping prices suppressed. The Energy Information Administration (EIA) forecasts that natural gas prices will remain below $3.00/MMBtu for the remainder of 2024, averaging around $2.20/MMBtu.

Concerns about China's demand and ongoing global market fluctuations have added to the uncertainty. The ongoing wildfires in Canada’s oil sands region have impacted production, providing some support to oil prices, which often correlate with natural gas prices. Analysts suggest that while the market faces uncertainties, the expected Federal Reserve interest-rate cuts could boost oil demand, indirectly influencing natural gas prices.

For those looking to navigate these choppy waters, investing in EQT Corporation (EQT) could be promising with its strong financial performance and growth potential. On the other hand, it could be wise to steer clear of Cheniere Energy, Inc. (LNG), given its bleak financial outlook. Let’s look at these stocks in detail.

Stock to Buy:

EQT Corporation (EQT)

EQT Corporation (EQT) is the leading independent natural gas producer in the United States, with a core asset base across the Appalachian Basin. Recently, the company closed its acquisition of Equitrans Midstream Corporation earlier than expected, which resulted in some savings. The operation of the Mountain Valley Pipeline, facilitated by this acquisition, is set to transport a significant amount of Marcellus production from the oversupplied Marcellus Basin to markets with solid pricing.

This move is expected to boost the average price received for their production, regardless of whether natural gas prices recover as anticipated. Plus, the acquisition is expected to materially decrease the cost of supply on a per-unit basis.

On July 16, EQT announced a quarterly dividend of $0.16 per share, payable on September 1, 2024. It pays an annual dividend of $0.63 per share, which translates to a yield of 1.79% at the current share price. EQT offers an attractive proposition for income-oriented investors seeking exposure to the energy sector. Also, it has a four-year average dividend yield of 0.85% and has grown its dividend payouts at a CAGR of 41.8% over the past five years.

Despite industry struggles, EQT reported profitable second-quarter results. During the quarter that ended June 30, 2024, the company’s total sales volume increased 7.8% year-over-year to 508 billion cubic feet equivalent (Bcfe). A slight increase in the average realized price per millions of cubic feet equivalent (Mcfe) boosted EQT’s attributable net income by a robust 114.3% rise from the same period last year to $9.52 million.

In addition, the company’s earnings per share was $0.02, compared to the previous quarter’s $0.18 loss per share. In addition, EQT’s adjusted operating cash flows grew 18.8% from its year-ago value to $405.04 million.

Analysts expect EQT’s revenue for the third quarter (ending September 2024) to increase 31.3% year-over-year to $1.56 billion, and its EPS for the ongoing quarter is expected to grow 18.6% year-over-year to $0.36. Furthermore, the company has topped the consensus EPS estimates in each of the trailing four quarters.

While the stock has lost nearly 19% over the past nine months and more than 11% year-to-date, this dip presents a potential buying opportunity. EQT’s solid financials, coupled with its attractive dividend yield and growth potential, make it a compelling choice for investors looking to capitalize on the natural gas sector.

Stock to Sell:

Cheniere Energy, Inc. (LNG)

Cheniere Energy, Inc. (LNG) is the leading producer and exporter of liquefied natural gas in the United States. It provides a clean, secure, and affordable solution to the increasing global demand for natural gas. As a full-service LNG provider, Cheniere manages everything from gas procurement and transportation to liquefaction, vessel chartering, and LNG delivery.

The company is due to reveal its fiscal 2024 second-quarter earnings on August 8, and the outlook isn't promising. Revenue is forecasted to dip by 13.5% year-over-year to $3.55 billion. Meanwhile, its EPS is anticipated to plummet by 70.4% from the previous year to $1.66.

This downward trend is expected to continue throughout the fiscal year ending December 2024; Cheniere Energy’s revenue and EPS are expected to decrease by 21.3% and 80.3% year-over-year to $16.05 billion and $8.04, respectively.

Further, the financial strain is reflected in the company's performance in the first quarter that ended March 31, 2024. LNG’s total revenues decreased 41.8% year-over-year to $4.25 billion, and its income from operations fell 85.6% from the prior year’s quarter to $1.15 billion.

Moreover, LNG’s net income and net income per share attributable to common stockholders came in at $502 million and $2.13, down 90.8% and 90.4%, respectively. Its consolidated adjusted EBITDA decreased 50.7% year-over-year to $1.77 billion.

Despite these deteriorating financial metrics, LNG’s Board of Directors approved an additional $4 billion in share repurchase authorization through 2027. It further announced a plan to increase its quarterly dividend by approximately 15% to $2.00 per common share annualized, commencing with the third quarter of 2024.

On June 17, the company announced a quarterly dividend of $0.435 per share, payable to its shareholders on August 16, 2024. LNG pays an annual dividend of $1.74, which translates to a yield of 0.99% at the current share price. It has a four-year average dividend yield of 0.57% and a payout ratio of 8.3%.

Shares of LNG have gained over 4% over the past six months and nearly 3% year-to-date, but these modest gains do little to counteract the company's broader financial challenges. The current outlook suggests that the risks outweigh the potential rewards, making LNG a less attractive investment option.