Tag: fourth quarter

3 Marijuana Stocks to Watch During Shifting Legalization Policies

Posted on by The INO.com Team

In recent years, the legalization of marijuana has sparked considerable controversy. While some see it as a positive development due to its perceived medical advantages and economic potential, others are wary of associated health hazards, increased availability to minors, and the risk of addiction.

Marijuana legalization across states varies significantly, with lawmakers either fully approving its use, permitting it solely for medical purposes, or enforcing penalties, including prison sentences, for its possession.

Nevertheless, despite the mounting concerns surrounding the disadvantages associated with the legalization of marijuana, as of April 2024, 38 states have legalized marijuana for medical purposes, with 24 of them also permitting it for recreational use.

With the anticipation of more states amending their laws to favor decriminalization of the substance by next year, a substantial segment of the American population aged 21 and above will likely gain access to marijuana.

Moreover, several other countries, such as Canada, Germany, Mexico, South Africa, and Thailand, have legalized marijuana. That said, the legalization of marijuana can provide a favorable regulatory environment for cannabis companies mentioned below.

Curaleaf Holdings, Inc. (CURLF)

With a focus on offering high-quality cannabis products catering to diverse consumer preferences, Curaleaf Holdings, Inc. (CURLF) operates across 17 states and manages around 145 dispensaries and 21 cultivation sites.

The company emphasizes its presence in densely populated states such as Arizona, Florida, Illinois, Massachusetts, New Jersey, New York, and Pennsylvania. CURLF kicked off the year by engaging in several strategic acquisitions to expand its market presence and drive sales.

For instance, in February, CURLF’s European division announced its acquisition of Can4Med, a prominent pharmaceutical wholesaler specializing in cannabinoid medications in Poland. This strategic initiative represents a major milestone for both entities and highlights CURLF’s dedication to improving patient access to premium medical cannabis products throughout Europe.

Meanwhile, in March, CURLF agreed to acquire Northern Green Canada (NGC), a vertically integrated Canadian licensed cannabis producer. This acquisition represents another significant milestone in CURFL’s expansion strategy, particularly in Europe.

Furthermore, this acquisition enables CURLF to enhance its European margins and extend its global footprint across North America, Europe, and Australasia (Australia/New Zealand).

Besides, the company reported a modest 1.5% year-over-year increase in fourth-quarter net revenue, totaling $345.27 million. CURLF reported an adjusted gross profit of $160.40 million and an adjusted gross margin of 46%. Its adjusted EBITDA rose 24.5% from the prior year’s period to $83.01 million.

Looking ahead, analysts foresee a 1% year-over-year rise in the company’s fiscal 2024 first-quarter revenue and a 26.9% year-over-year rise in its earnings per share.

Green Thumb Industries Inc. (GTBIF)

Green Thumb Industries Inc. (GTBIF) is a national cannabis consumer goods company and retailer dedicated to promoting wellness through cannabis while contributing to local communities. The company also operates a growing network of retail cannabis stores called RISE.

GTBIF has 20 manufacturing facilities, 92 retail locations, and operations across 14 U.S. markets. With a market cap of roughly $2.94 billion, the stock has surged more than 73% over the past year.

During the fiscal 2023 fourth quarter, the company witnessed a 7.3% year-over-year topline growth, reaching $278.23 million. Its attributable net income came in at $3.22 million and $0.01 per share versus a net loss of $51.23 million and $0.22 per share in the same period last year, respectively.

While reflecting on the past year's performance, GTBIF’s Chairman and CEO Ben Kovler highlighted the company’s record revenue and an adjusted EBITDA of $91 million. Additionally, GTBIF generated $225 million in cash flow from operations for the full year while investing over $200 million in capital expenditures to drive future growth.

Ending the year with a robust balance sheet, including $162 million in cash, the company returned a staggering $65 million to shareholders through share buybacks and debt repurchases. Furthermore, the board approved an additional $50 million for the share repurchase program, bringing the total remaining repurchase ability to nearly $60 million.

Looking ahead to 2024 and beyond, Kovler expressed optimism, citing the company's industry-leading brands, momentum, talented team, expanding customer base, and financial flexibility as driving factors for continued success.

Wall Street analysts also appear bullish for GTBIF’s upcoming first-quarter results, predicting an 8.2% year-over-year rise in revenue and an 18.5% year-over-year surge in earnings per share.

Trulieve Cannabis Corp. (TCNNF)

With shares up roughly 102.6% year-to-date, Trulieve Cannabis Corp. (TCNNF) has emerged as a top-tier, vertically integrated cannabis company operating across multiple states in the U.S. Its strong market presence in Arizona, Florida, and Pennsylvania forms the backbone of its operations in the Northeast, Southeast, and Southwest regions.

However, the company’s final quarter of 2023 revealed a mixed picture. TCNNF’s revenue dropped 3.7% year-over-year to $287 million. It reported an adjusted net loss of $23 million and $0.12 per share, slightly improving from a net loss of $34 million and $0.18 per share in the prior-year quarter, respectively.

On the positive side, the company’s gross margin and adjusted EBITDA margin stood at 54% and 31% versus 53% and 28% in the year-ago quarter.

Despite the mixed performance, TCNNF’s CEO Kim Rivers highlighted that the company is optimally positioned to capitalize on upcoming growth catalysts buoyed by its robust cash generation and a clearly defined strategy,

For the fiscal year ending December 2023, analysts expect TCNNF’s revenue to grow 2.2% year-over-year to $1.15 billion. Similarly, the company’s revenue for the fiscal year 2025 is expected to grow 6.5% from the prior year to $1.23 billion.

Moreover, CEO Kim Rivers recently expressed gratitude for the Florida Supreme Court's affirmative ruling on the Smart & Safe Florida initiative, which has been placed on the 2024 General Election ballot. If passed, the initiative will allow adults over 21 to purchase cannabis products for personal use, a development that could potentially strengthen the company’s financial position.

Bottom Line

As marijuana legalization policies across the U.S. and worldwide undergo significant shifts, investors have a unique opportunity to capitalize on the growth potential of the cannabis industry. Amid expanding legalization efforts, leading weed companies CURLF, GTBIF, and TCNNF could experience robust growth in the upcoming quarters.

To that end, investors could keep a close eye on these cannabis stocks for potential gains.

Warren Buffett's Oil Investments: Insights Into Berkshire Hathaway's Oil Holdings

Posted on by The INO.com Team

Warren Buffett, a prominent billionaire investor known for his investments through Berkshire Hathaway, holds significant investments in the oil sector, with holdings in Chevron Corporation (CVX) and Occidental Petroleum (OXY).

Buffett’s Berkshire Hathaway (BRK.A) (BRK.B) owns 126.1 million shares of CVX, valued at $1.5 billion. This ownership stake represents about 6.7% of the company’s outstanding shares.

Berkshire’s purchase of shares in CVX during the fourth quarter of 2023 is seen as a significant endorsement of Chevron’s $53 billion merger with Hess Corporation (HES), announced on October 23. This move is interpreted as a strong vote of confidence for Chevron's investors and the oil and gas sector as a whole.

Additionally, per Berkshire Hathaway’s February shareholder letter, the multinational investment firm holds a 27.8% stake in OXY and has warrants that could increase its ownership further at a fixed price.

“We particularly like its vast oil and gas holdings in the United States, as well as its leadership in carbon-capture initiatives, though the economic feasibility of this technique has yet to be proven,” Buffett said, “Both of these activities are very much in our country’s interest.”

In November, Occidental Petroleum and BlackRock, the world’s largest asset manager, announced a joint investment of $550 million in Occidental’s direct air capture plant, Stratos, located in West Texas. The plant is anticipated to commence operations by the middle of the upcoming year.

Direct air capture (DAC) technology differs from traditional carbon capture methods because it extracts carbon dioxide directly from the atmosphere instead of capturing emissions at the source, such as at industrial facilities like steel plants.

According to the International Energy Agency (IEA), 27 DAC plants have been commissioned globally to date, with plans for at least 130 DAC facilities in several stages of development. Both Occidental Petroleum and Exxon Mobil Corp (XOM) estimate that DAC could evolve into a multi-trillion-dollar market for oil producers by 2050 as scale brings costs down.

Warren Buffett has expressed admiration for Vicki Hollub, the President and CEO of Occidental Petroleum, who is the first woman to lead a major American oil company. “Under Vicki Hollub’s leadership, Occidental is doing the right things for both its country and its owners,” Buffett stated. “No one knows what oil prices will do over the next month, year, or decade.”

“But Vicki does know how to separate oil from rock, and that’s an uncommon talent, valuable to her shareholders and her country,” he added.

Understanding the Dynamics of the Energy Sector

Also, Berkshire's investments consider the dynamics of the energy sector, including factors such as supply and demand trends, geopolitical events, and technological advancements. Oil prices climbed above $90 per barrel last week. This surge was attributed to tensions in the Middle East, concerns regarding tightening supply, and optimistic expectations about demand growth amid improving economies.

Brent crude passed around $91 per barrel on Friday, taking its gains for the year to 18%. The U.S. West Texas Intermediate crude, closely linked to U.S. gasoline prices, has been even stronger, with 21% gains. Both benchmark crude oil prices settled at their highest levels since October 2023.

The oil market could see prices rise to $100 per barrel, especially if OPEC+ maintains its production cuts and extends them further into the second half of the year. This scenario is supported by expectations of robust demand, particularly in the second half, driven by economic growth and increased consumption.

Vitol’s Muller told on Gulf Intelligence’s Daily Energy Markets podcast that he anticipates a significant uptick in refined product demand globally, at around 2 million barrels per day (bpd) than in the same period last year.

This bullish outlook is echoed by experts like Bob McNally, founder of consultancy Rapidan Energy and a former White House adviser, who told Bloomberg Television in an interview that the market is currently “on firm fundamental footing.”

“I think $100 oil is entirely real — it just requires a little more risk pricing on the true geopolitical risk,” McNally added.

Now, let’s review the fundamentals of CVX and OXY in detail:

Chevron Corporation (CVX)

With a $299.80 billion market cap, CVX engages in integrated energy and chemicals operations internationally. It produces crude oil and natural gas; manufactures transportation fuels, lubricants, petrochemicals, and additives; and develops technologies that enhance its business and the industry.

The company also aims to grow its traditional oil and gas business, lower the carbon intensity of its operations, and expand its new lower carbon business in renewable fuels, hydrogen, carbon capture, and other emerging technologies.

On April 4, Chevron New Energies (CNE), a CVX division, announced a lead investment in ION Clean Energy (ION), a Boulder-based tech company that provides post-combustion point-source capture technology through its third-generation ICE-31 liquid amine system. ION raised $45 million in Series A financing led by CNE. 

“We continue to make progress on our goal to deliver the full value chain of carbon capture, utilization, and storage (CCUS) as a business, and we believe ION is a part of this solution,” said Chris Powers, vice president of CCUS & Emerging with CNE.

Also, on March 19, CNE and JX Nippon Oil & Gas Exploration Corporation signed a Memorandum of Understanding (MoU) that offers a framework to evaluate the export of Carbon Dioxide (CO₂) from Japan to Carbon Capture and Storage (CCS) projects located in Australia and other countries in the Asia Pacific region.

For the fourth quarter ended December 31, 2023, CVX’s total revenues and other income declined 16.5% year-over-year to $47.18 billion. Its total adjusted earnings and adjusted EPS decreased 17.8% and 15.6% over the prior-year quarter to $6.45 billion and $3.5, respectively.

However, the company’s worldwide and U.S. net oil-equivalent production set annual records. Worldwide production increased 4% from a year ago to more than 3.1 barrels of oil-equivalent per day, primarily due to the acquisition of PDC Energy, Inc. (PDC) and growth in the Permian Basin, up 10% from 2022. This was led by 14% growth in the U.S.

Last year, CVX returned more cash to shareholders and produced more oil and gas than any other year in the company’s history. Cash returned to shareholders was nearly $26 billion for the full year, 18% higher than the prior year’s total.

The company’s Board of Directors further declared an 8% increase in the quarterly dividend to $1.63 per share, paid on March 11, 2024, to all holders of common stock, as shown on the transfer records of the corporation at the close of business on February 16, 2024.

CVX’s annual dividend of $6.52 translates to a yield of 4.03% on the current share price. Its four-year average dividend yield is 4.43%. Moreover, the company’s dividend payouts have increased at CAGRs of 6.08% and 6.3% over the past three and five years, respectively.

For 2024, CVX announced an expected organic capital expenditure range of $15.5 to $16.5 billion for consolidated subsidiaries (capex) and an affiliate capital expenditure (affiliate capex) budget of around $3 billion. With the acquisition of PDC Energy, Chevron announced an annual capex guidance range of $14 to $16 billion through 2027.

Following the completion of the Hess acquisition, which is expected to be finalized in the first half of 2024, CVX’s annual capex budget is expected to increase significantly to a range of $19 billion to $22 billion.

Analysts expect CVX’s revenue for the fiscal year (ending December 2024) to increase by 1.8% year-over-year to $204.64 billion. However, the consensus EPS estimate of $12.82 for the current year indicates a decline of 2.4% year-over-year.

Occidental Petroleum Corporation (OXY)

With a market cap of $60.94 billion, OXY is a global energy company with assets primarily in the U.S., the Middle East, and North Africa. The company is one of the largest oil and gas producers in the U.S., including a leading producer in the Permian and DJ basins and offshore Gulf of Mexico. 

On February 8, OXY’s Board of Directors declared a regular quarterly dividend of $0.22 per share on common stock, payable on April 15, 2024, to stockholders of record at the close of business on March 8, 2024. The annual dividend per share has increased to $0.88 from its previous rate of $0.72.

OXY’s annual dividend translates to a yield of 1.27% on the current share price. Its four-year average yield is 3.44%. The company’s dividend payments have grown at a CAGR of 5.7% over the past three years.

On December 11, 2023, OXY entered a purchase agreement to acquire Midland-based oil and gas producer CrownRock L.P., a joint venture of CrownQuest Operating LLC and Lime Rock Partners. This acquisition is anticipated to deliver increased free cash flow on a share basis, including $1 billion in the first year based on $70 per barrel WTI.

The acquisition further complements and strengthens Occidental’s leading Permian portfolio by adding around 170 thousand barrels of oil equivalent per day (Mboed) of high-margin, lower-decline unconventional production in 2024 and approximately 1,700 undeveloped locations. It enhances the company’s resource base and growth potential in the region.

During the fourth quarter that ended December 31, 2023, OXY’s revenues and other income decreased 9.6% year-over-year to $7.53 billion. Its income before income taxes declined 35% from the prior year’s quarter to $1.56 billion. Its non-GAAP EPS came in at $0.74, down 54% year-over-year.

Furthermore, the company’s current liabilities increased to $9.15 billion as of December 31, 2023, compared to $7.76 billion as of December 31, 2022.

Street expects OXY’s revenue and EPS for the first quarter (ending March 2024) to decline 9.4% and 45.8% year-over-year to $6.58 billion and $0.59, respectively. For the fiscal year 2024, the consensus EPS estimate of $3.37 indicates a decrease of 8.9% year-over-year.

However, the company’s revenue for the ongoing year is expected to increase 2.5% year-over-year to $29.63 billion.

Bottom Line

Warren Buffett’s investments in the oil sector through Berkshire Hathaway have garnered attention, particularly with holdings in CVX and OXY. Hathaway’s oil investments are also aligned with the demand-supply dynamics in the energy sector. The recent surge in oil prices, driven by tensions in the Middle East, supply constraints, and an optimistic demand outlook, reflects the evolving landscape that Buffett’s investments navigate.

While rising oil prices, production growth, strategic acquisitions and investments, and continued commitment to rewarding shareholders via dividends make CVX an attractive option for long-term investors seeking growth, the company continues to face several challenges, including commodity price dependence, higher operational costs, and uncertainty in the energy transition.

Chevron's core business in oil and gas exploration (upstream) makes it susceptible to boom-and-bust cycles in commodity prices. The company’s earnings dropped in 2023 due to lower oil and gas prices and reduced refining profits, highlighting the ongoing challenge of staying profitable amid market changes. Also, analysts have presented a mixed outlook for 2024.

CVX also faces cost headwinds, with its operating expenses trending upward and inflationary pressures threatening to squeeze margins further. Moreover, the global shift toward renewable energy presents a long-term challenge for oil and gas companies. 

Regarding OXY, its investments in low-carbon ventures, strategic acquisitions, and technology advancements present numerous opportunities for growth and industry leadership. However, the company must also tackle challenges related to its reliance on commodity prices, managing operational costs and debt obligations, and navigating global economic uncertainties.

While Occidental’s last reported earnings topped analyst estimates, they dropped compared to year-ago values. Further, analysts appear bearish about the company’s financial performance this year.

Staying profitable in such a volatile environment requires strategic resilience, efficient cost management, and a focus on operational excellence to navigate through boom-and-bust cycles effectively. So, given the mixed performance and outlook for CVX and OXY, investors may consider waiting for a better entry point before investing in these stocks.

While Buffett’s endorsement and long-term investment strategy hold weight, it’s essential to assess the companies’ financial health, growth prospects, and industry trends comprehensively.