2 Energy Stocks That Wall Street Is Very Bullish On

Energy stocks, while volatile, can provide a good balance of growth, income, and diversification opportunities. Many energy companies have a long history of consistent dividend payouts.

Energy stocks can provide a good balance of growth, income, and diversification opportunities. Many energy companies have a long history of consistent dividend payouts, which makes them appealing to income-oriented investors. Furthermore, energy is a necessary component of economic activity, ensuring long-term demand and making energy companies attractive growth stocks. Here are two such energy stocks that Wall Street is very bullish on.

#1. Frontline (NYSE:FRO)

Frontline is a shipping company that focuses on the transportation of crude oil (CLF25) and refined petroleum products. Frontline's fleet and operational scale position it as a key player in global energy logistics, facilitating the transportation of essential commodities across oceans.

So far this year, Frontline stock has declined by 9.5%, compared to the S&P 500 Index’s (SPX) gain of 26%.

Frontline maintains a fleet of vessels that includes Very Large Crude Carriers (VLCCs), Suezmax tankers, and Aframax tankers. These ships are designed to transport crude oil efficiently over long distances. The company's revenue is primarily derived from spot market earnings (revenue from voyages booked on a per-trip basis) and time-charter contracts (contracts under which vessels are leased out for a set period). While spot earnings are volatile and heavily reliant on supply-demand dynamics in the shipping market, time-charter contracts provide a more consistent income.

In the second quarter, total revenue of $556 million increased 8.4% year-over-year. Adjusted earnings per share fell to $0.62, from $0.94 in Q2 2023. Management stated that seasonality has a significant impact on the tanker markets and that the summer is the company's slowest period.

The company freed up capital in the second and third quarters to pay off its total debt of $670 million. It also refinanced 10 Suezmax tankers through a sale-and-leaseback agreement, which is expected to generate $101 million in net proceeds. This will allow the company to repay the remaining $75 million under the $275 million senior unsecured revolving credit facility.

Frontline is a dividend stock, paying an attractive 13% yield. However, its high payout ratio of 81.1% raises concerns about the dividend's sustainability.

Frontline will release its third-quarter earnings results on Nov. 27 after the market closes. Analysts expect the company to report $317.6 million in revenue and a profit of $0.38 per share, up from $0.36 in the year-ago quarter.

Analysts predict 25% revenue growth in 2024, but earnings may fall by 9.9%. In 2025, however, revenue and earnings are expected to rise by 14.8% and 26.4%, respectively. Frontline, valued at two times forward sales, is an affordable energy dividend stock to buy right now. However, as with all energy stocks, Frontline is risky.

Emerging markets, particularly in Asia, are fueling global oil demand. This trend contributes to long-term demand for crude oil transportation. For investors who can tolerate volatility, Frontline provides a unique opportunity to participate in the ever-changing energy and shipping sectors.

Overall, FRO stock is a “strong buy” on Wall Street, according to all five analysts in coverage. Based on its average target price of $31.18, the stock has an upside potential of 72.6% from current levels. Its high target price of $37 implies a 104.7% potential increase over the next 12 months.

#2. Civitas Resources (NYSE:CIVI)

Civitas Resources is a domestic oil and natural gas producer operating in the Denver-Julesburg (DJ) and Permian basins. Civitas stock has dipped 25.8% year-to-date, compared to the broader market's gain.

Civitas generates a mix of oil, natural gas (NGZ24), and natural gas liquids (NGLs), ensuring a diverse revenue stream. In the third quarter, crude oil accounted for 87% of total revenue. The company generated $1.27 billion in total operating revenue, a 23.3% increase year-over-year. Diluted earnings also increased by 93% to $3.01 per share.

The company is committed to a balanced approach that combines energy production with sustainability practices. Civitas Resources is praised for its shareholder-friendly capital return strategy. In addition to regular dividends, Civitas pays variable dividends tied to its free cash flow, which appeals to income investors.

In the third quarter, adjusted free cash flow totaled $366.3 million. After paying its quarterly base dividend of