Tag: first quarter

Oil Stocks on the Rise: Pro-Oil Stance from Trump Boosts Sector

Posted on by The INO.com Team

The recent presidential debate between President Joe Biden and former President Donald Trump has stirred significant movements in the equity markets, especially within the energy sector. Biden’s shaky performance drove sentiment around Trump’s odds of securing a second term in the White House, propelling stocks of private prisons, credit card companies, and health insurance firms.

However, the most notable surge has been in oil stocks, reflecting Trump’s pro-oil policies and the market’s anticipation of potential benefits under his presidency.

Trump’s Pro-Oil Policies: A Catalyst for Growth

Trump’s administration has consistently advocated for deregulation and expansion of oil drilling activities, and a second term could amplify these policies. Last month, Donald Trump told Senate Republicans he would restart oil drilling in Alaska’s Arctic National Wildlife Refuge if re-elected. This promise is seen as a green light for increased oil production, potentially boosting the profitability and growth of oil companies.

Moreover, Trump offered to roll back environmental regulations, hasten permitting and leasing approvals, and enhance tax benefits that the energy industry enjoys if top U.S. oil executives agreed to donate $1 billion for his White House re-election. Lower regulatory hurdles could lead to cost reductions for oil companies, making exploration and drilling more economically viable.

In the wake of the debate, energy stocks emerged as some of the best performers of the S&P 500 index despite a slight dip in Brent crude and West Texas Intermediate prices. Baker Hughes Co. (BKR) led the sector’s rally, with Valero Energy Corporation (VLO), Phillips 66 (PSX), Targa Resources Corp. (TRGP), and Occidental Petroleum Corporation (OXY) following suit.

This recent surge is primarily driven by the market’s reaction to Trump’s potential White House re-election, which is perceived to favor the oil and gas industry significantly.

Top Beneficiaries of Pro-Oil Stance From Trump

Phillips 66 (PSX)

Valued at a market cap of $59.51 billion, Phillips 66 (PSX) is a global energy manufacturing and logistics company. It operates in four segments: Midstream; Chemicals; Refining; and Marketing and Specialties (M&S). The company’s diversified operations could benefit from reduced regulatory pressures and expansion of oil drilling activities supported by Trump’s pro-oil policies.

On May 21, Phillips 66 agreed to acquire Pinnacle Midland Parent LLC from Energy Spectrum Capital in a strategic move to expand its natural gas gathering and processing footprint in the Midland Basin. Pinnacle’s assets encompass the newly built Dos Picos natural gas gathering and processing system: a 220 MMcf/d gas processing plant, 80 miles of gathering pipeline, and 50,000 dedicated acres through high-quality producers in one of PSX’s focus basins. 

Mark Lashier, Chairman and CEO of Phillips 66, said, “Pinnacle is a bolt-on asset that advances our wellhead-to-market strategy and complements our diversified and integrated asset portfolio. Further, this transaction aligns with our long-term objectives to build out our natural gas liquids value chain, be disciplined with our capital allocation and create sustainable value for our shareholders.”

Also, in April, PSX’s Board of Directors approved a quarterly dividend of $1.15 per share, representing a rise of 10%. The dividend was paid on June 3, 2024, to shareholders of record as of the business close on May 20, 2024. The dividend increase demonstrates the company’s confidence in its growing mid-cycle cash flow generation and disciplined capital allocation strategy, which includes maintaining a secure and competitive dividend.

Since its establishment in 2012, Phillips 66 has consistently increased its dividend, resulting in a CAGR of 16%. Moreover, the company is well-poised to continue delivering substantial shareholder value by executing its strategic priorities, including returning $13-$15 billion to shareholders via dividends and share repurchases from July 2022 to the year-end 2024.

For the first quarter that ended March 31, 2024, PSX reported revenue of $36.44 billion, beating analysts’ estimate of $33.56 billion. Its adjusted earnings were $822 million, or $1.90 per share, respectively. During the quarter, refining operated at 92% crude utilization. As of March 31, 2024, the company had cash and cash equivalents of $1.60 billion and $3.50 billion of committed capacity available under its credit facility.

Further, Phillips 66, through the successful execution of its strategic priorities, remains committed to increasing mid-cycle adjusted EBITDA to $14 billion by 2025 and returning more than 50% of operating cash flow to shareholders.

PSX’s stock is up around 5% year-to-date and has gained more than 45% over the past year.

Occidental Petroleum Corporation (OXY)

Occidental Petroleum Corporation (OXY) also stands to gain significantly from Trump’s pro-oil stance. OXY is a leading energy company with assets mainly in the U.S., the Middle East, and North Africa. The company’s extensive operations in the Permian and DJ basins and offshore Gulf of Mexico, coupled with potential regulatory rollbacks, could enhance its production capabilities.

Over the past six months, shares of OXY have surged more than 3% and approximately 46% over the past year. Moreover, the stock has already shown positive movement following the presidential debate, reflecting investor optimism.

Last month, OXY and BHE Renewables, a wholly-owned subsidiary of Berkshire Hathaway Energy, formed a joint venture for the demonstration and deployment of TerraLithium’s Direct Lithium Extraction (DLE) and associated technologies to extract and commercially produce high-purity lithium compounds from geothermal brine.

By utilizing Occidental’s expertise in managing and processing brine within its oil & gas and chemicals businesses, combined with BHE Renewables’ extensive knowledge in geothermal operations, OXY is exceptionally equipped to advance a more sustainable method of lithium production.

During the first quarter that ended March 31, 2024, OXY posted an adjusted net income attributable to common stockholders of $604 million, or $0.63 per share. Notably, midstream and marketing surpassed guidance for pre-tax income by nearly $100 million. Also, OxyChem exceeded guidance with a pre-tax income of $260 million.

In addition, Occidental’s total production was $1,172 Mboed near the mid-point of its guidance. Solid operational performance drove cash flow from operations of $2 billion and cash flow from operations before working capital of $2.3 billion.

“Operational excellence is fundamental to everything we do at Occidental, and our teams delivered at a high level across all segments during the first quarter of 2024,” stated OXY’s President and Chief Executive Officer Vicki Hollub. “We are executing in all areas of our diversified portfolio and positioned for free cash flow growth.”

Analysts expect OXY’s revenue and EPS for the second quarter (ended June 2024) to increase 3.5% and 26.4% year-over-year to $6.97 billion and $0.82, respectively. Also, the company has topped the consensus EPS estimates in three of the trailing four quarters.

Targa Resources Corp. (TRGP)

With a $29.62 billion market cap, Targa Resources Corp. (TRGP) is a prominent provider of midstream services. The company primarily engages in the gathering, compressing, treating, processing, transporting, and selling of natural gas; transporting, storing, fractionating, treating, and purchasing and selling natural gas liquids (NGLs) and NGL products, like services to LPG exporters; and gathering, terminaling, and purchasing and selling crude oil.

TRGP, with its focus on natural gas and NGLs, stands to benefit from the Trump administration’s favoring fossil fuels. TRGP’s stock has soared more than 14% over the past month and around 52% over the past six months. Moreover, the stock is up nearly 72% over the past year.

Targa recently began operations at its new 120 MBbl/d Train 9 fractionator in Mont Belvieu, TX. Further, construction continues on Targa’s 275 MMcf/d Greenwood II plant in Permian Midland and its 230 MMcf/d Roadrunner II and 275 MMcf/d Bull Moose plants in Permian Delaware. In the Logistics and Transportation (L&T) segment, construction continues on Targa’s 120 MBbl/d Train 10 fractionator in Mont Belvieu, its Daytona NGL Pipeline.

In May, TRGP, to increase production and meet the rising infrastructure needs of customers, announced the construction of a new 275 MMcf/d cryogenic natural gas processing plant in Permian Midland (Pembrook II plant) and the construction of a new 150 MBbl/d fractionator in Mont Belvieu (Train 11).

Moreover, in April, Targa Resources’ Board of Directors declared an increase to its quarterly cash dividend to $0.75 per share, or $3 per share annually, for the first quarter of 2024. This dividend represents a 50% rise from the dividend declared in the first quarter of 2023. The dividend increase indicates the company’s solid financial health and confidence in its continued growth.

In the first quarter that ended March 31, 2024, TRGP’s revenues increased 1% year-over-year to $4.56 billion. Its adjusted operating margin grew 3% from the prior year’s quarter to $622.10 million. Its NGL pipeline transportation volumes were $717.80 million, up 34% year-over-year.

Additionally, the company’s adjusted EBITDA rose 2.7% from the year-ago value to $966.20 million. Its adjusted cash flow from operations was $738.40 million for the quarter.

Street expects TRGP’s revenue for the fiscal year (ending December 2024) to increase 22.9% year-over-year to $19.74 billion. The consensus EPS estimate of $5.36 for the current year indicates an improvement of 46.4% year-over-year.

Bottom Line

The recent debate between President Joe Biden and former President Donald Trump has underscored the potential for significant market shifts based on political outcomes, particularly within the energy sector. With Trump’s pro-oil policies gaining renewed attention, companies like Phillips 66, Occidental Petroleum, and Targa Resources are well-positioned to capitalize on a supportive regulatory environment and expansion of drilling activities.

As the election approaches, the energy sector’s trajectory will likely remain closely tied to political developments. Investors should remain vigilant and consider the implications of potential policy changes on their portfolios. The solid financial performance and strategic initiatives of PSX, OXY, and TRGP, combined with the potential regulatory shifts under the Trump administration, could drive growth and deliver significant shareholder value in the upcoming years.

Top Travel Stocks for the 4th of July

Posted on by The INO.com Team

As the 4th of July approaches, the demand for transportation services surges, driven by the nation’s eagerness to travel and celebrate. The American Automobile Association (AAA) expects 70.9 million individuals to travel 50 miles or more from home over the Independence Day holiday period, surpassing levels witnessed before the pandemic.

For the first time, AAA has analyzed the entire week of July 4th, including the Saturday before and the Sunday after the holiday. This year’s projected number of travelers represents a 5% growth compared to last year and an 8% increase over 2019.

“With summer vacations in full swing and the flexibility of remote work, more Americans are taking extended trips around Independence Day,” stated Paula Twidale, Senior Vice President of AAA Travel. “We anticipate this July 4th week will be the busiest ever with an additional 5.7 million people traveling compared to 2019.”  

The travel group projects a record 60.6 million Americans will travel by car the July 4th week, a rise of 2.8 million travelers compared to 2023. This year's figure also exceeds the 55.3 million people who traveled by car during Independence Day week in 2019.

The number of air travelers is also anticipated to reach a new record. AAA projects that 5.74 million people will fly to their July 4th destinations, marking an increase of approximately 7% year-over-year and a 12% rise over 2019. According to AAA booking data, domestic airfare is 2% cheaper this Independence Day week compared to last year, with the average price for a domestic roundtrip ticket at $800.

The increase in mobility presents a unique investment opportunity in the travel sector, particularly for companies such as Uber Technologies, Inc. (UBER), Southwest Airlines Co. (LUV), and Delta Air Lines, Inc. (DAL). These companies are strategically positioned to capitalize on the holiday rush through operational efficiencies, route expansions, and customer service innovations.

Here’s an in-depth look at why these stocks are attractive investments during peak travel seasons.

Uber Technologies, Inc. (UBER)

Valued at a market cap of $151.87 billion, Uber Technologies, Inc. (UBER) is a leading global ride-hailing company. It connects consumers with a wide range of transportation modalities, including ridesharing, carsharing, public transit, taxis, rentals, micromobility, and other modalities; it also provides riders with several vehicle types.

UBER’s platform leverages advanced algorithms and data analytics to match drivers with passengers efficiently. During peak travel times like the 4th of July, Uber’s dynamic pricing model ensures supply meets demand, optimizing driver availability and minimizing passenger wait times. This operational efficiency is crucial in managing the high volume of holiday travelers.

Features like upfront pricing, real-time tracking, and a robust safety protocol contribute to a seamless travel experience for Uber users.

Moreover, Uber continues to expand its service offerings and geographic reach. It introduced a shuttle service in the U.S. at its GO-GET annual event. The ridesharing company announced that Uber Shuttle users can now reserve up to five seats in advance on buses operating in high-traffic areas such as airports, concerts, and sports events. Uber will collaborate with local fleet operators for this service, utilizing vehicles with capacities ranging from 14 to 55 seats.

Notably, the company has increased its presence in key tourist destinations and expanded its ride options to include shared rides, luxury cars, and eco-friendly transportation, catering to a diverse customer base and enhancing its appeal during the holiday season.

For the first quarter that ended March 31, 2024, UBER’s gross bookings rose 20% year-over-year to $37.70 billion, with Mobility Gross Bookings of $18.70 billion (up 25% year-over-year). Its revenue increased 15% from the year-ago value to $10.10 billion. Its income from operations was $172 million, compared to a loss from operations of $262 million in the same quarter of 2023.

Furthermore, the company’s adjusted EBITDA grew 81.6% from the prior year’s period to $1.38 billion. Its free cash flow came in at $1.36 billion, an increase of 148% year-over-year.

For the second quarter of 2024, Uber expects gross bookings of $38.75 billion to $40.25 billion, representing 18% to 23% year-over-year growth on a constant currency basis. The company’s adjusted EBITDA is expected to be $1.45-$1.53 billion, representing 58%-67% year-over-year.

Analysts expect UBER’s revenue and EPS for the second quarter (ended June 2024) to increase 14.3% and 70% year-over-year to $10.55 billion and $0.31, respectively. For the fiscal year 2024, the company’s revenue and EPS are expected to grow 15.8% and 4.3% year-over-year to $43.18 billion and $0.91, respectively.

UBER’s stock is up around 14% over the past month and has gained more than 64% over the past year. Further gains could come with the July 4th rally.

Delta Air Lines, Inc. (DAL)

Delta Air Lines, Inc. (DAL) is a leading global airline headquartered in Atlanta, Delta, with a market cap of $30.61 billion. The company served over 190 million customers in 2023 – safely, reliably, and with industry-leading customer service innovation – and was recognized as North America’s most on-time airline by Cirium.

Delta Air Lines operates significant hubs and markets in Amsterdam, Atlanta, Boston, Lima, London-Heathrow, Los Angeles, New York-JFK and LaGuardia, Paris-Charles de Gaulle, Salt Lake City, Santiago (Chile), São Paulo,  Seoul-Incheon, and Tokyo. The airline maintains strategic partnerships with Aeromexico, Air France-KLM, China Eastern, Korean Air, LATAM, Virgin Atlantic, and WestJet.

DAL’s extensive network and strategic alliances allow it to offer numerous direct flights, reducing layover times and enhancing passenger convenience. Thus, the company is well-positioned to capture a larger share of the holiday travel market and meet the increased demand effectively.

DAL’s operating revenue increased 8% year-over-year to $13.75 billion for the first quarter that ended March 31, 2024. Its adjusted operating income grew 17.2% from the previous year’s period to $640 million. Its adjusted net income and earnings per share were $288 million and $0.45, up 43.4% and 44.4% year-over-year, respectively.

As of March 31, 2023, the company’s cash and cash equivalents amounted to $3.88 billion, compared to $2.74 billion as of December 31, 2023. Its current assets were $11.58 billion versus $10.27 billion as of December 31, 2023.

After an outstanding first-quarter performance, Delta is expected to continue solid business momentum. For the second quarter of 2024, the company expects total revenue growth of 5%-7% year-over-year. Its operating margin is expected to be 14% to 15%, and earnings of $2.20 to $2.50 per share.

For the fiscal year 2024, DAL projects earnings of $6 to $7 per share. The company’s free cash flow is expected to be $3-$4 and adjusted debt to EBITDAR of 2x-3x.

Analysts expect Delta’s revenue and EPS for the fiscal year (ending December 2024) to increase 3% and 5.9% year-over-year to $59.77 billion and $6.62, respectively. Also, the company has topped the consensus revenue and EPS estimates in all four trailing quarters, which is impressive.

Shares of DAL have surged more than 16% over the past six months and nearly 17% year-to-date.

Southwest Airlines Co. (LUV)

With a market cap of $17.12 billion, Southwest Airlines Co. (LUV) is a prominent passenger airline company that offers scheduled air transportation services in the U.S. and near-international markets.

As of December 31, 2023, the company had a total fleet of 817 Boeing 737 aircraft and served around 121 destinations in 42 states, the District of Columbia, and the Commonwealth of Puerto Rico, as well as near-international countries, including Mexico, Aruba, Costa Rica, Jamaica, the Bahamas, Belize, Cuba, the Dominican Republic, the Cayman Islands, and Turks and Caicos.

Southwest Airlines is well-known for its low-cost, high-efficiency operational model. As a part of its birthday celebration, LUV announced a sale on flights starting as low as $53 one-way. Also, in May, the company introduced Cash + Points, a new flexible payment option for Rapid Rewards® Members. Southwest Rapid Rewards® Members can now use a combination of cash and points on hotel bookings.

The airline's flexible booking policies and extensive network of direct flights make it a preferred choice for many travelers. Southwest Airlines’ route expansion and new destinations are aligned with its strategy to capture the leisure travel market, which peaks during holidays like the 4th of July.

Southwest has consistently been recognized for its customer service, emphasizing a hassle-free travel experience. The airline is ranked first in customer satisfaction among economy-class passengers by J.D. Power for the third consecutive year.

During the first quarter that ended March 31, 2024, LUV’s passenger operating revenues increased 11.9% year-over-year to $5.71 billion. Its total operating revenues grew 10.9% from the prior year’s quarter to $6.33 billion. As of March 31, 2024, the company’s cash and cash equivalents stood at $8.37 billion, and current assets were $13.28 billion.

Street expects LUV’s revenue for the second quarter (ended June 2024) to increase 5.1% year-over-year to $7.39 billion. Similarly, the consensus revenue estimate of $27.69 billion for the fiscal year (ending December 2024) indicates an improvement of 6.1% year-over-year.

LUV’s stock has surged more than 6% over the past month.

Bottom Line

AAA projects a record of around 71 million people to make trips for the Independence Day travel period this year. UBER, DAL, and LUV are well-positioned to benefit from the increased demand for transportation services during the 4th of July. Their operational efficiencies, route expansions, and customer service innovations provide a strong foundation for capturing a larger share of the leisure travel market.

Given robust financial performances and bright growth outlooks, these stocks present attractive investment opportunities during peak travel seasons.

Chinese EV Companies: Top Leaders in the Global Shift to Electric Vehicles

Posted on by The INO.com Team

In the rapidly evolving landscape of electric vehicles (EVs), Chinese manufacturers are emerging as dominant players, reshaping global markets traditionally led by Western automakers. As the U.S. and Europe impose tariffs and trade barriers, China’s EV upstarts are strategically expanding into developing markets, including Brazil, Mexico, and Southeast Asia.

In May, the Biden administration announced plans to slap new tariffs on Chinese EVs, advanced batteries, and other goods intended to protect U.S. manufacturers. Moreover, the European Commission (EU) will impose extra duties of up to 38.1% on imported Chinese electric cars starting in July, raising concerns about possible retaliation from Beijing.

According to data compiled by technology intelligence firm ABI Research for Business Insider, Chinese automakers have already established significant dominance in several emerging markets. In Brazil, China’s carmakers captured around 88% of the EV market, while in Thailand, they held a 70% share during the first quarter.

Despite their current small size, the EV markets in most of these countries are experiencing rapid growth.

Chinese EV companies such as BYD Company Limited (BYDDY), NIO Inc. (NIO), and XPeng Inc. (XPEV) are at the forefront of this transformation, leveraging technological prowess and strategic market expansions to solidify their positions worldwide.

BYD Company Limited (BYDDY)

With a $95.78 billion market cap, BYD Company Limited (BYDDY) is one of China’s leading automobile manufacturers that engages in new EVs and power batteries internationally. The company operates in two segments: Mobile Handset Components, Assembly Service and Other Products; and Automobiles and Related Products and Other Products.

BYDDY’s strategic approach combines technological leadership, market diversification, and strategic partnerships and investments to solidify its position as a frontrunner in the global EV industry. The company has expanded its footprint in regions, including Brazil, Mexico, Australia, and Southeast Asia, capitalizing on growing world demand for EVs.

According to ABI Research figures, BYD accounted for about 71% of EV sales in Brazil and 45% in Thailand in the first quarter.

On May 16, BYD launched its first pickup truck, BYD SHARK, in Mexico. BYD SHARK is positioned as a new energy-intelligent luxury pickup featuring the DMO Super Hybrid Off-road Platform. This model represents the latest addition to BYD's product range, tailored for global markets, marking the company’s first global product launch outside China.

Stella Li, Executive Vice President of BYD and CEO of BYD Americas, said, “With the introduction of our inaugural new energy pickup, BYD SHARK, we’re poised to redefine the conventional fuel pickup landscape through advanced technology, providing users with a lifestyle characterized by boundless opportunities. BYD is now ushering in the era of the global new energy pickup.”

Also, in March, BYDDY launched its third electric car, Seal, a premium electric sedan with a price starting at around $49,458, in India’s booming EV market. In 2023, the company sold 1,877 cars in India, an increase of 314% year-over-year.

Notably, in the same month, BYD Company became the world’s first automaker to roll off its seven millionth new energy vehicle, the DENZA N7, which was introduced at its Jinan factory in China, underscoring another groundbreaking accomplishment for the brand.

For the first quarter that ended March 31, 2024, BYDDY’s operating revenue increased 4% year-over-year to RMB124.94 billion ($17.20 billion). Net profit attributable to shareholders of the listed company rose 10.6% from the year-ago value to RMB4.57 billion ($629.28 million). Its earnings per share came in at RMB1.57, up 10.6% from the previous year’s quarter.

Analysts expect BYDDY’s revenue and EPS for the fiscal year (ending December 2024) to increase 25.7% and 15.9% year-over-year to $104.92 billion and $3.14, respectively. For the fiscal year 2025, the company’s revenue and EPS are expected to grow 13.3% and 9.2% from the prior year to $118.86 billion and $3.43, respectively.

BYDDY’s stock is up nearly 14% over the past month and has gained more than 11% year-to-date.

NIO Inc. (NIO)

With a $9.27 billion market cap, NIO Inc. (NIO) has gained prominence for its focus on high-performance, smart EVs and innovative battery-swapping technology. Based in Shanghai, China, the company provides five and six-seater electric SUVs, as well as smart electric sedans. It also offers power solutions, including Power Home, Power Swap, Power Charger and Destination Charger, Power Mobile, Power Map, and more.

Besides its solid presence in China, NIO has established footholds in global markets such as Southeast Asia, Latin America, and Europe, aiming to capitalize on the growing demand for luxury EVs. Moreover, NIO plans to expand to the Middle East in 2024, CEO William Li stated on an earnings call, adding that deliveries of its lowest-priced brand will begin in the first half of the following year.

On April 8, NIO officially inaugurated its Smart Driving Technology Center in Schönefeld near Berlin. It is the first center outside China, underscoring the company's expanding international footprint.

NIO delivered 20,544 vehicles in May, indicating a substantial increase of 233.8% year-over-year. The deliveries comprised 12,164 premium smart electric SUVs and 8,380 premium smart electric sedans. Also, in April, the company delivered 15,620 vehicles. As of May 31, 2024, cumulative deliveries of NIO vehicles reached a staggering 515,811.

“Despite the intensifying market competition, NIO’s premium brand positioning, industry-leading technologies, and innovative ‘chargeable, swappable, upgradeable’ power experience have been recognized for their exceptional competitiveness, leading to solid sequential growth in vehicle deliveries in recent months,” said William Bin Li, chairman and CEO of NIO.

“In April 2024, we launched the 2024 ET7 Executive Edition, featuring 180 upgrades tailored to the needs of business travelers and professionals, further enhancing our competitiveness in the premium sedan market. In addition, with a commitment to create better family life, our new smart electric vehicle brand, ONVO, along with its inaugural product L60, was unveiled in May 2024,” he added.

Further, NIO extended its strategic cooperation on battery swapping by collaborating with GAC Group and FAW Group. These add to NIO’s existing network of strategic alliances with Changan Automobile, Geely Group, JAC Group, Chery Automobile, and Lotus Technology. NIO remains dedicated to advancing its evolving battery-swapping ecosystem, aiming to deliver efficient and convenient recharging solutions for its customers.

During the first quarter that ended March 31, 2024, NIO reported vehicle sales of $1.16 billion, and its total revenues were $1.37 billion. Its gross profit grew 200.5% from the prior year’s quarter to $67.60 million. As of March 31, 2024, the company’s cash and cash equivalents, restricted cash, short-term investment and long-term time deposits stood at $6.30 billion.

Analysts expect NIO’s revenue for the fiscal year (ending December 2024) to increase 21.4% year-over-year to $9.38 billion. Likewise, the company’s revenue for the fiscal year 2025 is anticipated to grow 43.7% year-over-year to $13.48 billion. Also, NIO’s stock has surged approximately 2% over the past five days.

XPeng Inc. (XPEV)

With a $7.48 billion market capitalization, XPeng Inc. (XPEV) designs, develops, and markets Smart EVs in China that appeals to the large, growing base of tech-savvy consumers. It provides SUVs under the G3, G3i, and G9 names; four-door sports sedans under the P7 and P7i names; and family sedans under the P5 name.

XPeng’s competitive pricing appeals to budget-conscious consumers without compromising quality or innovation. The company has expanded its operations into Europe and Southeast Asia, leveraging local partnerships and market insights to adapt its offerings to regional preferences.

XPEV delivered 10,146 Smart EVs in May, an increase of 35% year-over-year and 8% over the previous month. The XPENG X9 notably achieved monthly deliveries of 1,625 units, reaching a cumulative total of 11,456 units. Since its launch, it has continuously led sales in both the all-electric MPV and three-row model segments in China. XPENG has delivered 41,360 Smart EVs year-to-date, marking a 26% rise year-over-year.

On May 20, XPEV launched XOS 5.1.0, Tianji, the industry’s first AI-powered in-car OS. It features end-to-end large model technology, promoting the smart driving experience for XPENG car owners. The company will offer intelligent and personalized in-car AI assistant services through AI assistant Xiao P, AI Chauffeur, and AI Bodyguard. The recent launch outlines XPeng’s new market positioning as the global pioneer and promoter of AI smart driving.

In the first quarter that ended March 31, 2024, XPEV’s total revenues increased 62.3% year-over-year to $910 million, and revenues from vehicle sales were $770 million, up 57.8% from the prior year’s quarter. The company’s gross margin was 12.9% for the first quarter, compared to 1.7% for the same period of 2023. As of March 31, 2024, its cash and cash equivalents, restricted cash, short-term investments and time deposits were $5.73 billion.

XPENG’s physical sales network reached 574 stores, covering about 178 cities as of March 31, 2024. Also, its self-operated charging station network had a total of 1,171 stations, including 359 XPENG S4 ultra-fast charging stations, at the end of the first quarter.

Xiaopeng He, Chairman and CEO of XPENG, further stated, “Through our strategic partnership with the Volkswagen Group, XPENG is at the forefront of monetizing in-house developed smart technologies as a technology enabler. Our industry-leading technologies are expected to gain greater market influence and yield better financial returns.”

Street expects XPEV’s revenue for the second quarter (ending June 2024) to increase 63.2% year-over-year to $1.13 billion. Similarly, the consensus revenue estimate for the fiscal year (ending December 2024) of $6.12 billion indicates an improvement of 43.6% year-over-year. Also, the company has topped the consensus revenue and EPS estimates in three of the trailing four quarters.

Shares of XPEV have surged more than 7% over the past five days.

Bottom Line

China’s EV newcomers seem to be strategizing for global dominance. They are expanding into developing markets, including Brazil, Mexico, Indonesia, Thailand, and India, amid tariff and trade barriers imposed by the U.S. and Europe.

Chinese manufacturers like BYDDY, NIO, and XPEV are leveraging their technological prowess and strategic market expansions to establish themselves as leaders in the global EV industry. These companies lead in cost-effective manufacturing and are at the forefront of advancements in battery technology, autonomous driving, and user-centric design.

With ambitious global expansion plans and a commitment to sustainability, these China-based EV giants are poised to reshape the automotive industry, setting new standards for electric mobility worldwide.

Chevron vs. NextEra Energy: Which Dividend Stock is the Better Buy?

Posted on by The INO.com Team

Despite the industry challenges, Chevron Corporation (CVX) and NextEra Energy, Inc. (NEE) are both gaining significant traction and rewarding shareholders with reliable dividends. But if you had to choose between them, which would be the better buy?

Chevron's Dividend Strength Over 37 Years

Chevron is one of the largest integrated energy majors globally, with operations spanning oil production, transportation, and processing. This strategic spread helps cushion the inherent volatility in oil and gas markets, ensuring stability and sustained growth.

Recently, oil prices dipped after hitting seven-week highs. Brent crude futures slipped to $85.27 a barrel, while U.S. West Texas Intermediate crude dropped to $81.47 per barrel. Despite the cyclical nature of the oil sector, Chevron’s solid operational and financial performance continues to shine through.

In its latest earnings release, the company reported a double-digit increase in worldwide production and returned $6 billion in cash to shareholders. CVX beat first-quarter earnings estimates, with an adjusted EPS of $2.93, surpassing analysts' expectations of $2.87. U.S. production surged to 1.57 million barrels of oil and gas per day, a 35% increase from a year ago, thanks to strong output from the Permian and Denver-Julesburg basins.

What truly sets Chevron apart is its financial muscle. The company’s debt-to-equity ratio is a mere 0.12, the lowest among its peers. This low leverage gives CVX the flexibility to support its operations and sustain its dividends even during downturns, providing a significant competitive advantage.

In the first quarter of 2024, Chevron’s return on capital employed exceeded 12%, reflecting efficient management and strategic investments. The company increased its quarterly dividend by 8% sequentially to $1.63 per share and repurchased nearly $3 billion worth of its shares.

With 36 consecutive years of dividend growth and a forward dividend yield of 4.16%, Chevron offers investors a compelling mix of income and growth potential. CVX has a four-year average yield of 4.35%, and its dividend payouts have grown at a CAGR of 6.4% over the past three years.

Moreover, the company aims to grow its annual free cash flow (FCF) by nearly 10% through 2027, even if Brent crude prices fall to $60 per barrel. With Brent crude currently around $83 per barrel, Chevron has ample room for growth. CVX’s strategy focuses on improving ROCE by investing in high-return areas like the Permian Basin, expected to drive substantial cash flow growth.

Increasing cash flow and robust dividend growth make CVX an attractive long-term investment. The company’s ability to navigate market fluctuations and maintain financial stability positions it as a top choice for investors seeking security and growth in the energy sector. Shares of CVX have gained over 4% over the past six months and nearly 5% year-to-date.

How Is NEE Positioned to Reward Shareholders?

NextEra Energy is a dual force in the energy sector, uniquely positioned with substantial operations in regulated utilities and renewable energy. As one of the largest regulated utility companies in the U.S., NEE enjoys stable earnings through its main subsidiary, Florida Power & Light (FPL).

FPL's recent expansion efforts, including the addition of 1,640 megawatts of new solar capacity, underscore its commitment to clean energy and meeting the growing electricity demands. In the first quarter that ended March 31, 2024, FPL reported a net income of $1.17 billion or $0.57 per share, reflecting an increase of 9.5% and 7.5% year-over-year, respectively.

Simultaneously, NextEra Energy Resources, the company's renewable energy arm, continues to advance in sustainable energy production. The segment had a record quarter, adding approximately 2,765 megawatts of new renewables and storage projects to its backlog. Its adjusted earnings for the quarter were $828 million and $0.40 per share, up from $732 million and $0.36 per share in the first quarter of 2023.

Financially, NEE's performance remains robust. During the quarter, the company’s adjusted earnings amounted to $1.87 billion or $0.91 per share, reflecting an increase of 11.6% and 8.3%, respectively. Its adjusted EBITDA was $462 million, and $164 million cash was available for distribution. Moreover, its revenue and EPS have grown at respective CAGRs of 16.6% and 20.2 over the past three years.

Looking forward, NEE sees significant growth potential in the U.S. renewables and storage market, expecting it to triple over the next seven years from 140 gigawatts to around 375-450 gigawatts. With an existing 74-gigawatt operating fleet, split between FPL and Energy Resources, the company aims to expand to over 100 gigawatts by 2026, further strengthening its operational scale and creating additional value for its stakeholders.

On June 17, NEE paid its shareholders a quarterly dividend of $0.52 per share. With 28 consecutive years of dividend growth and a forward dividend yield of 2.84%, NEE offers an attractive proposition for income-oriented investors seeking exposure to the clean energy sector. Also, it has a four-year average dividend yield of 2.23% and has grown its dividend payouts at a CAGR of 10.2% over the past three years.

All said, NEE stands at the forefront of the energy transition, leveraging its dual strengths in regulated utilities and renewable energy to drive sustainable growth and value creation. The stock has gained over 21% over the past six months and over 19% year-to-date.

Should You Buy Chevron or NextEra Energy?

Analysts are bullish on these dividend-paying giants, each presenting significant upside potential. So, how do these two stack up?

Mizuho gave Chevron a Buy rating and raised the price target from $200 to $205, implying a substantial 23.59% upside from the current price of $156.64. This sentiment is echoed by other prominent analysts, with HSBC and Scotiabank setting price targets of $178 and $195, respectively. This results in an average price target of $186.95, suggesting a potential 16% upside.

On the other hand, NextEra Energy has also caught the eye of analysts. BMO Capital recently maintained an Overperform rating on the stock and raised the price target from $78 to $79, suggesting an 8.3% upside from the current price of $72.46.

In terms of dividend yield as a rough measure of value, CVX's 4.2% yield is far more attractive compared to NEE's modest 2.8%. While both stocks historically offered higher yields during oil downturns, NextEra Energy's current yield is comparatively lower. This positions CVX as a stronger income play and suggests it may be the more attractive stock between the two.

Copper's Correction: Time to Re-Evaluate Your Investments

Posted on by The INO.com Team

The copper market has seen a significant uptrend in 2024, with prices surging more than 20% from mid-February to late May. However, shortly after that, copper prices fell below $10,000 per metric ton on the London Metal Exchange (LME) due to increasing global inventories and sluggish U.S. job openings data.

Meanwhile, COMEX copper futures continued their downward trend, dipping below $4.5 per pound in June, nearing their lowest level in over a month, completely erasing the gains made in May that pushed copper prices to a record high of $5.2. This price decline is primarily due to evidence of lower near-term demand.

After the official Manufacturing Purchasing Manager Index (PMI) indicated an unexpected contraction in China's manufacturing sector, trade data for the period revealed a 7.1% decrease in imports of copper ore turnover, despite the previous price surge, as refiners have increasingly turned to using scrap to sustain production. As a result, Chinese inventories have grown to their highest levels since 2020, surpassing seasonal trends that usually favor a drawdown.

So, the price of deliveries from Shanghai bonded warehouses has remained at a discount to the LME for two consecutive weeks. Moreover, the LME three-month contract has lost nearly 12% since it hit a record high of $11,104.50 on May 20, 2024.

Despite this, copper prices have risen by around 15% year-to-date, driven by speculative bets on impending shortages. This speculation is fueled by copper’s critical role in electrification, particularly in grid-scale energy and data center infrastructure, and the challenges associated with launching new projects for fresh ore supply.

Bullish Long-Term Trend

The long-term COMEX copper futures chart, dating back to 1971, reveals that futures never surpassed the $1.6475 per pound level before 2005. However, since then, the market dynamics have shifted significantly, with copper prices not falling below $2 since early 2016 and have stayed above $3 per pound since October 2020. The price action pattern indicates that a new all-time high has followed every correction in copper.

Similarly, the long-term London Metals Exchange (LME) copper chart exhibits a bullish technical pattern.

Overall, these patterns suggest a robust and ongoing upward trend in copper prices, driven by increased demand, limited supply, and copper’s critical role in various industries. Despite short-term volatility, this long-term bullish trend indicates a positive outlook for copper investments.

However, the recent correction prompts investors to reassess their positions in copper stocks such as Freeport-McMoRan Inc. (FCX) and Southern Copper Corporation (SCCO), considering both the potential for future growth and the current risks involved.

Freeport-McMoRan Inc. (FCX)

With a $69.76 billion market cap, Freeport-McMoRan Inc. (FCX) is a prominent metals company with a primary focus on copper. The company manages seven copper operations in North America: Morenci, Bagdad, Safford (including Lone Star), Sierrita, and Miami in Arizona, as well as Chino and Tyrone in New Mexico. Additionally, FCX operates a copper smelter in Miami, Arizona.

FCX has a potential expansion project to surpass the concentrator capacity of its Bagdad operation in northwest Arizona. With a life expectancy exceeding 80 years, Bagdad's reserve supports an expanded operation. In late 2023, the company finalized technical and economic studies, indicating the opportunity to build new concentrating facilities to boost copper production by 200-250 million pounds annually, exceeding Bagdad’s current output rate.

At its Safford/Lone Star operation, FCX is completing projects aimed at increasing copper production from oxide ores to 300 million pounds per year. It marks an expansion from the initial design capacity of 200 million pounds per year.

For the first quarter that ended March 31, 2024, FCX’s copper sales were 1.1 billion pounds, 11% higher than the January 2024 estimate of 1 billion pounds, and 33% up from the prior year’s quarter, mainly reflecting higher mining and milling rates and ore grades at PT-FI. Its revenues rose 17.3% year-over-year to $6.32 billion.

Further, average unit net cash costs for FCX’s copper mines of $1.51 per pound were below the January 2024 estimate of $1.55 per pound and first-quarter 2023, primarily reflecting higher copper volumes at PT-FI. During the quarter, the company’s operating cash flows were $1.9 billion, net of $0.1 billion of working capital and other uses. As of March 31, 2024, cash and cash equivalents totaled $5.2 billion.

Kathleen L. Quirk, FCX’s President, stated, “Our first-quarter results reflect strong execution of our operating plans, consistent with our long-standing focus on operational execution.”

“Market fundamentals for copper are positive, supported by copper’s increasingly important role in the global economy and limited available supplies to meet growing demand. Freeport is strongly positioned for the future as a leading producer of copper with multiple options for future growth and an experienced team with a track record of accomplishment,” Quirk added.

Moreover, the company’s financial policy aligns with its strategic objectives of maintaining a solid balance sheet, delivering cash returns to shareholders, and pursuing opportunities for future growth. On March 27, 2024, FCX’s Board of Directors declared cash dividends of $0.15 per share on its common stock, paid on May 1, 2024, to shareholders of record as of April 15, 2024.

For the year 2024, the company’s sales are expected to approximate 4.15 billion pounds of copper, and unit net cash costs are anticipated to average $1.57 per pound of copper. Further, FCX expects operating cash flows to be nearly $7.4 billion, net of $0.2 billion of working capital and other uses, for the year.

Street expects FCX’s revenue and EPS for the fiscal year (ending December 2024) to increase 10.5% and 5.8% year-over-year to $25.26 billion and $1.63, respectively. Moreover, the company has topped the consensus revenue estimates in all four trailing quarters.

Shares of FCF have surged more than 30% over the past six months and approximately 31% over the past year. However, the stock has declined nearly 5% over the past month.

Southern Copper Corporation (SCCO)

With a market cap of $84.35 billion, Southern Copper Corporation (SCCO) engages in mining, exploring, smelting, and refining copper and other minerals. The company operates the Toquepala and Cuajone open-pit mines and a smelter and refinery in Peru; and La Caridad, an open-pit copper mine, alongside copper ore concentrator, a SX-EW plant, a smelter, refinery, and a rod plant in Mexico.

In addition, the company operates Buenavista, an open-pit copper mine, as well as two copper concentrators and two operating SX-EW plants in Mexico.

During the first quarter that ended March 31, 2024, SCCO’s net sales grew 13.3% from the previous quarter to $2.60 billion. The growth was mainly driven by a surge in the sales volumes of copper (+9.6%) and silver (+15.3%) and an uptick in metal prices for all its products. Its operating cash cost per pound of copper dropped 14.2% quarter-over-quarter.

Notably, copper production registered a quarter-on-quarter rise of 6,181 tons (+2.6%) and 16,998 tons (+7.6%) compared to the prior year’s quarter. Year-over-year growth was mainly attributable to a rise in copper from concentrate production at all its mines (+12.7%), including 2,158 tons of copper from the new zinc concentrator.

Furthermore, SCCO’s operating income grew 37% from the prior year to $1.19 billion. The company’s net income was $736 million, or $0.95 per share, an improvement of 65.4% and 63.8% quarter-on-quarter, respectively. Its adjusted EBITDA rose 34.3% from the previous year to $1.42 billion.

Cash inflows from operating activities were $659.9 million, a 22% increase from the $540.9 million reported in the fourth quarter of 2023. This improvement was due to strong cash generation from its operations, driven by higher sales and effective cost-control measures. As of March 31, 2024, the company’s cash and cash equivalents were $1.25 billion, compared to $1.15 billion as of December 31, 2023.

On April 19, 2024, SCCO’s Board of Directors declared a quarterly stock dividend of 0.0104 shares of common stock, paid on May 23, 2024, for shareholders of record at the close of business on May 8, 2024.

During the last earnings call, SCCO stated that it sees robust market demand, driven by both a resilient US economy and emerging needs in decarbonization technologies and artificial intelligence. These factors will play a substantial role in bolstering long-term copper demand, thereby maintaining favorable copper prices. Demand is anticipated to increase by nearly 2.5% this year.

Analysts expect SCCO’s revenue and EPS for the second quarter (ending June 2024) to increase 14.4% and 27.7% year-over-year to $2.63 billion and $0.90, respectively. Additionally, the company’s revenue and EPS for the fiscal year 2024 are anticipated to grow 11.3% and 25.1% from the prior year to $11.01 billion and $3.89, respectively.

SCCO’s stock has surged more than 44% over the past six months and approximately 54% over the past year. However, the stock has plunged around 10% over the past month due to a recent correction.

Bottom Line

The recent correction in copper prices, marked by a decline from a record high hit on May 20, can be attributed to several factors affecting supply and demand dynamics in the market. Higher global inventories and evidence of lower near-term demand, particularly highlighted by an unexpected contraction in China's manufacturing sector, led to a downturn in copper prices.

For investors, this correction serves as a reminder of the inherent volatility in commodity markets. However, it does not necessarily negate the long-term bullish trend driven by increased demand, limited supply, and copper’s critical role in various industries, especially in electrification and decarbonization initiatives. Despite short-term fluctuations, the fundamental drivers supporting copper’s growth trajectory remain intact.

Investors should consider strategies to navigate periods of high volatility. Diversification across different assets can help mitigate risks associated with individual commodities or stocks. Furthermore, hedging options such as futures contracts or options can safeguard against adverse price movements.

In the case of FCX and SCCO, their robust operational performances and strategic initiatives position them for long-term solid growth. However, investors should remain vigilant, continuously reassessing their positions and adjusting strategies as market conditions evolve. They can navigate copper price fluctuations by staying informed and adopting a diversified approach while capitalizing on the long-term potential.