Top 5 Best-Performing Energy Stocks This Year

On December 15, 2024, 3:25 AM

The energy sector has endured yet another lackluster year, with the S&P 500 Energy Sector having returned 7.1% in the year-to-date, the fourth lowest among the 11 market sectors in the S&P 500. Both Oil & Gas as well as renewable energy stocks have underperformed, with the Energy Select Sector SPDR Fund (NYSEARCA:XLE), the famous oil and gas benchmark, having gained 7.3% YTD compared to -22.6% return by the iShares Global Clean Energy ETF (NASDAQ:ICLN) and 27.6% by the S&P 500.

Unfortunately, both fossil fuel and clean energy sectors are facing an uncertain future under a second Trump presidency. A new survey from law firm Haynes Boone LLC has revealed that banks are gearing up for oil prices to fall below $60 a barrel by the middle of Trump’s new term. The survey of 26 bankers showed that they expect WTI prices to drop to $58.62 a barrel by 2027, more than $10 lower than current oil prices. Trump says he’ll push shale producers to ramp up output, even if it means operators “drill themselves out of business.” However, it’s not clear he intends to accomplish this feat since U.S. oil is produced by independent companies and not a national oil company (NOC). Exxon Mobil’s (NYSE:XOM) Upstream President Liam Mallon recently dismissed the notion that U.S. producers will dramatically increase output under a second Trump term.

“I think a radical change is unlikely because the vast majority, if not everybody, is primarily focused on the economics of what they’re doing,” Mallon said last week at a conference in London.

Meanwhile, the biggest reason why solar and clean energy stocks have been routed ever since Trump was declared president-elect is because his presidency threatens the historic Inflation Reduction Act (IRA). For years, Trump has never hidden his disdain for clean energy. He has repeatedly lambasted the IRA, describing it as the “biggest tax hike in history”. Trump has pledged to rescind any “unspent” funds under the IRA, “To further defeat inflation, my plan will terminate the Green New Deal, which I call the Green New Scam,” Trump told the Economic Club of New York in September.

“I think a radical change is unlikely because the vast majority, if not everybody, is primarily focused on the economics of what they’re doing,” Mallon said last week at a conference in London.

That said, there’s no shortage of oil, gas and renewable energy stocks that have comfortably trounced the markets. Here are the Top 5 Best-Performing Energy Stocks This Year.

#1. Oil & Gas

Targa Resources Corp. (NYSE:TRGP)

Market Cap: $40.6B

Year-to-Date Returns: 115.5%

Texas-based Targa Resources Corp. (NYSE:TRGP) owns general and limited partner interests in a limited partnership that provides midstream natural gas and natural gas liquid services. The company gathers, compresses, treats, processes, and sells natural gas. TRGP has earned a Buy recommendation from Goldman Sachs thanks to a strong return on equity (or ROE).

“Stronger-than-expected economic growth represents the clearest upside risk to ROE. [It] would create upside to asset turnover through faster sales growth and to profit margins through operating leverage. Stronger growth has recently coincided with hotter-than-expected inflation, however,” wrote GS analyst David J. Kostin. “

Targa reported Q3 record adjusted EBITDA of $1.07 billion but revenue of $3.85B (-1.3% Y/Y) missed by $210M. The company’s adjusted EBITDA and growth capital projections have been trending higher than previously estimated from the acceleration of spending on infrastructure to handle additional volume growth. For 2024, the company estimates full year adjusted EBITDA to be above the top end of its $3.95 billion to $4.05 billion range. Targa plans to detail its full year 2025 operational and financial outlook in February 2025 in conjunction with its fourth quarter 2024 earnings announcement.

#2. Renewable Energy

Eco Wave Power (NASDAQ:WAVE)

Market Cap: $86.8M

YTD Returns:948.4%

Eco Wave Power (NASDAQ:WAVE) is a wave energy company that develops wave energy conversion (WEC) technology that converts ocean and sea waves into clean electricity. WAVE shares have been surging after the company received the final nationwide permit from the U.S. Army Corps of Engineers for its wave energy project at the Port of Los Angeles in California. The company will install eight wave energy floaters on the piles of an existing concrete wharf structure on the east side of the port’s Municipal Pier One.

According to Eco Wave, securing the final permit marks the completion of two key milestones in its agreement with Shell (NYSE:SHEL) which is expected to boost the company’s revenues in Q4 2024.

#3. Electric Vehicles

Tesla Inc.(NASDAQ:TSLA)

Market Cap: $1.4T

YTD Returns: 69.3%

Tesla Inc. (NASDAQ:TSLA) is one of the largest manufacturers of electric vehicles on the planet. TSLA stock is trading close to an all-time high with the strong bullish vibe being driven by the view that the Elon Musk-led company will benefit from a Trump Administration that will be friendly to the process of securing autonomous vehicle approvals as it looks to grow the robotaxi fleet rapidly over the next two years. However, Wall Street is more cautious about the shares, assigning TSLA a Hold rating and an average price target of only $259.66, considerably lower than the current price of $421.44. Some bears have pointed out that a similar monster rally in 2021 was followed by a drop of more than 70% over the next 18 months.

#4. Nuclear Energy

NuScale Power Corp.(NYSE:SMR)

Market Cap: $5.7B

YTD Returns: 615.2%

NuScale Power Corp.(NYSE:SMR) is a developer of modular light-water reactor nuclear power plants. Small modular nuclear reactors (SMRs) are advanced nuclear reactors with power capacities that range from 50-300 MW(e) per unit, compared to 700+ MW(e) per unit for traditional nuclear power reactors. The shares have surged this year thanks to the ongoing enthusiasm for a nuclear energy renaissance. However, SMR stocks and nuclear stocks in general have lately been pulling back after the sector overheated following a big rally.

Back in October, we reported that NextEra Energy (NYSE:NEE) CEO John Ketchum revealed that he’s “not bullish” on small modular reactors (SMRs), adding that the company’s in-house SMR research unit has so far not drawn favorable conclusions about the technology.

“A lot of [SMR equipment manufacturers] are very strained financially,” he said. “There are only a handful that really have capitalization that could actually carry them through the next several years.”

#5. Utilities

Vistra Corp: (NYSE:VST)

Market Cap: $49.7B

YTD Returns: 280.5%

Vistra Corp: (NYSE:VST) is an integrated retail electricity and power generation company. VST shares have rocketed after crushing analyst expectations with a 54% Y/Y surge in revenues to $6.28B in Q3, while also raising full-year profit guidance. Vistra raised guidance for FY 2024 ongoing operations adjusted EBITDA and ongoing operations adjusted free cash flow guidance to $5B-$5.2B and $2.65B-$2.85B, respectively, excluding any potential benefit from the nuclear production tax credit.

Vistra has also been benefiting from the ongoing nuclear energy revival. The company has revealed that it has held talks with the biggest data center developers to upgrade nuclear plants to increase power output.

Story By oilprice.com