Wall Street Favorites: 3 Energy Stocks With Strong Buy Ratings for May 2024


  • As macroeconomic factors continue to fuel the energy sector, here’s a look at three energy stocks to buy this month.
  • Exxon Mobil (XOM): The acquisition of Pioneer Natural Resources will help the oil giant expand its footprint in the Permian Basin. 
  • ConocoPhillips (COP): A diversified upstream portfolio coupled with a strong balance sheet, makes COP stock a good buy.
  • Shell (SHEL): The company’s focus on maximizing shareholder value through a $3.5 billion share buyback program makes this stock a good buy for income-focused investors.
energy stocks to buy - Wall Street Favorites: 3 Energy Stocks With Strong Buy Ratings for May 2024

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As oil prices rise, it’s worth looking at the top energy stocks to buy in May. The energy sector, typically known for its volatility, was off to a strong start this year. This robust demand comes after a lackluster 2023 as global economic concerns drove prices down. Since then, sentiments towards economic performance have changed for the better with the U.S. economy’s resilience in the face of geopolitical turmoil. 

Energy stocks typically perform in tandem with the economy. As a result, the positive economic outlook we’ve seen this year has led to a rise in demand for fuel. Adding to this, the Fed’s decision to keep interest rates the same, as inflation levels stabilize, has further cemented investor confidence in the markets. The strong performance of energy companies bodes well for income investors seeking a high dividend payout.

Exxon Mobil (XOM)

XOM Stock Is on the Way Back, but It Will Take Some Time
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Fossil fuel giant Exxon Mobil (NYSE:XOM) remains a strong buy for investors in May. The company boasts an expansive portfolio and a dividend yield of 3.2%. Its offerings include upstream, downstream, refining and distribution capabilities across multiple geographies. These diversified operations offer Exxon a protective shield from economic fluctuations. 

Adding to this impressive portfolio, the company’s recent acquisition of Pioneer Natural Resources aims to improve efficiency and lower its environmental impact in the Permian Basin. Exxon believes that Pioneer’s knowledge of the Permian and its technological and financial resources will accelerate returns from this basin. Based on estimates, the basin’s volume is expected to reach two million barrels of oil equivalent per day in 2027. 

Although its recent earnings came in slightly under Wall Street’s estimates, Exxon’s acquisitions and diversified portfolio make it a great energy stock to buy for long-term gains.

ConocoPhillips (COP)

a sign in front of the Conoco Philips office building
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ConocoPhillips (NYSE:COP) prides itself for its robust upstream capabilities. Also referred to as exploration and production (E&P), the company has built a solid upstream base making it the most valuable E&P company in the U.S. Some of its bases include the Permian Basin and Eagle Ford Shale. 

And while its portfolio is certainly impressive, it’s COP’s financials that make this stock a strong buy. 

The upside of having a diversified upstream asset line enables ConocoPhillips to have low production related costs. The average cost to supply a barrel of oil is $32. In essence, the low cost ensures the company’s balance sheet remains optimized while maintaining low debt exposure. This has safeguarded ConocoPhillips from the volatility of oil and gas prices resulting in strong returns for shareholders. Its current annual dividend yield sits at 3.2%. 

In an effort to maximize shareholder value, the upstream giant also announced that it distributed $2.2 billion from its cash flow operations. This was done through ordinary dividends and share repurchases in Q1.

A diverse upstream portfolio and strong shareholder returns makes this one of the best energy stocks to buy right now. 

Shell (SHEL)

Shell logo on a gas station in Iceland. SHEL stock
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As far as energy companies go, Shell (NYSE:SHEL) is a namesake in the industry. The British oil giant’s performance was off to a strong start this year posting better than expected numbers in Q1. The company reported earnings of $7.7 billion which beat analyst estimates of $6.5 billion. This was a result of strong oil trading and high margins. 

After a solid Q1, Shell plans to reward its shareholders with a $3.5 billion share buyback program. The company’s CEO, Wael Sawan says that the company’s pragmatic approach will result in “attractive shareholder returns”. And while we’re on the topic of shareholder returns, it is also worth noting the company distributed $23 billion in profits in 2023 after a profitable year. 

A strong financial performance coupled with rising oil prices has resulted in a lot of upside for Shell this year. As the company continues to invest in its core business and maximize shareholder value, SHEL stock is among the top energy stocks to buy this year.

On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Divya has a background in finance and accounting and has worked in FP&A roles at Fortune 500 companies. She is an avid reader and enjoys writing on a variety of topics including stocks, crypto, blockchain and global policy.

Article printed from InvestorPlace Media, https://investorplace.com/2024/05/energy-stocks-to-buy-in-may/.

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