If I Were You, I’d Buy These 2 Stocks Before They Skyrocket

Two stocks are poised to skyrocket in the impending comeback and bull run of the energy sector in 2024.

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The TSX’s energy sector has picked steam in the last 30 days following a soft start this year. As of this writing, the sector is the market leader with a +10.36% year-to-date gain versus the broader market’s +4.16%. Notably, many of its constituents are volume leaders, if not experiencing unusual volumes.

Two energy stocks from different industries appear ready to skyrocket. If I were to take a position before the bull run, my top picks are Parkland (TSX:PKI) and Total Energy Services (TSX:TOT).  

Oil & gas refining & marketing

Parkland is a growth company supported by an integrated business that includes retail, commercial, and refining. The $7.79 billion international fuel distributor and retailer boasts over 4,000 global retail and commercial locations, serving over one million customers daily in Canada, the U.S., and the Caribbean.

At $44.32 per share (+3.77% year to date), the trailing one-year price return is 57.66%. Current investors partake in the 3.47% dividend. Also, Parkland is a Dividend Aristocrat. The 3% dividend hike recently marks 12 consecutive years of dividend increases. Market analysts’ average 12-month price target is $54.50 (+23%).

Management expects the resilient business model and growth platform to deliver long-term shareholder value. In 2023, sales and operating revenue declined 8.5% year over year to $32.45 billion, while net earnings jumped 52% to $471 million versus 2022.

Parkland’s president and chief executive officer (CEO), Bob Espey, said it was an excellent year and noted the record $1.91 billion adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization). In the fourth quarter (Q4) of 2023, net earnings and available cash rose 24.64% and 53% to $86 million and $181 million compared to Q4 2022.

For 2024 and beyond, Parkland will continue to execute its accretive organic initiatives. The company will enhance the digital platform in the retail segment and grow the “ON the Run” program through a differentiated food offer. Besides expanding the renewable business, the multi-product offerings should help the commercial segment grow fuel volumes.

Last, Parkland will optimize logistics capabilities and expand supply optionality while leveraging scale to grow purchasing power. In 2023, the retail business (42%) contributed the most to the record adjusted EBITDA, followed by commercial (36%) and refining (22%).        

Oil & gas equipment & services

Thus far, in 2023, Total Energy is flying high. At $10.01 per share, current investors enjoy a 32.41% market-beating return on top of the 3.69% dividend. Based on market analysts’ buy rating, the average upside potential in one year is 245.69% ($35).

The $400 million diversified energy services supplier operates in Canada and internationally. Its four business lines provide equipment and expertise for customers’ drilling, completion, production, transportation, oil and gas process equipment, and natural gas compression needs.

In 2023, net income, revenue, and cash flow increased 9%, 17%, and 25% year over year to $41.6 million, $892.4 million, and $163.3 million. At year-end, Total Energy had $123.4 million of positive working capital and a $162.8 million sales backlog.

Management maintains a positive outlook due to relatively stable industry conditions. The completion of several liquefied natural gas export facilities should also provide relief to North America’s natural gas market.

The energy slump is over

Industry experts believe Canada’s energy sector slump is over. Parkland and Total Energy Services, in particular, will likely outperform and deliver outsized capital gains in addition to stable quarterly dividends.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Total Energy Services. The Motley Fool has a disclosure policy.

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