Tag: first quarter

Investing Amidst the $100B China Chip War

Posted on by The INO.com Team

In a move set to reshape the global semiconductor landscape, China's ambitious $100 billion investment spree into its semiconductor industry is poised to disrupt Western chipmakers’ foothold in the lucrative Chinese market.

According to a recent report by the European Commission highlighted by Bloomberg, concerns are mounting over the potential erosion of market share for companies like NXP Semiconductors N.V. (NXPI), Infineon Technologies AG (IFNNY), and ASML Holding N.V. (ASML). These firms, pivotal players in microcontroller technology essential for automobiles, industrial applications, and consumer electronics, face intensifying competition from burgeoning Chinese counterparts.

The European Commission's report underscores that China's strategic maneuvers, including non-tariff barriers and local content requirements, could favor domestic microcontroller manufacturers. This advantage is particularly potent in China's burgeoning electric vehicle market, posing challenges for European and Japanese chip suppliers.

Moreover, China's aggressive investment surge follows heightened geopolitical tensions, including U.S. sanctions limiting Chinese access to high-end chips. Despite these restrictions, China has reportedly found alternative routes to procure U.S. technology, underscoring its determination to achieve semiconductor independence. As China makes aggressive investments in semiconductor fabrication plants and encourages local procurement of key semiconductor components, the ripple effects are felt globally.

Investors navigating this evolving landscape should consider diversifying across sectors and exploring resilient segments within tech. Despite China's semiconductor ambitions and geopolitical tensions, investing in solid companies like Advanced Micro Devices, Inc. (AMD) and Intel Corporation (INTC) could provide stability and growth potential.

Let’s look at the fundamentals of the abovementioned stocks in detail:

Stocks to Buy:

Advanced Micro Devices, Inc. (AMD)

Prominent chip giant AMD offers x86 microprocessors, graphics processing units (GPUs), and innovative solutions across Data Center, Client, Gaming, and Embedded segments. AMD also develops embedded processors, semi-custom system-on-chip (SoC) products, and advanced technologies like field programmable gate arrays (FPGA) and adaptive SoCs.

In the first quarter that ended March 30, 2024. AMD’s net revenue increased 2.2% year-over-year to $5.47 billion. Both its Data Center and Client segments experienced substantial growth, each exceeding 80% year-over-year, fueled by the uptake of MI300 AI accelerators and the popularity of Ryzen and EPYC processors.

Moreover, the company’s non-GAAP operating income grew 3.2% from the year-ago value to $1.13 billion. Its non-GAAP net income and earnings per share rose 4.4% and 3.3% from the prior-year quarter to $1.01 billion and $0.62, respectively.

Street expects AMD’s revenue for the second quarter (ended June 2024) to increase 6.7% year-over-year to $5.72 billion. Its EPS for the to-be-reported quarter is projected to reach $0.68, registering a 17.2% year-over-year growth. Moreover, the company surpassed the consensus revenue estimates in each of the trailing four quarters.

Intel Corporation (INTC)

INTC designs manufactures, and markets a wide range of computing products globally, including CPUs, GPUs, memory, and connectivity solutions. Known for its microprocessors, Intel powers PCs, servers, and emerging technologies across cloud, network, and edge computing platforms. It operates through segments including Client Computing Group, Data Center and AI, Network and Edge, Mobileye, and Intel Foundry Services.

The company delivered robust performance in the first quarter of 2024 (ended March 30), driven by solid innovation across its client, edge, and data center portfolios. Total Intel Products generated $11.90 billion in revenue, resulting in a 17% year-over-year increase. Revenue from the Client Computing Group (CCG) rose 31% year-over-year.

INTC’s net revenue increased 8.6% year-over-year to $12.72 billion, while its Data Center and AI (DCAI) division’s sales rose 5% to $3.04 billion. Also, the company reported a non-GAAP operating income of $723 million, compared to an operating loss of $294 million in the prior year’s quarter. Further, its non-GAAP net income and non-GAAP earnings per share came in at $759 million and $0.18 versus a net loss and loss per share of $169 million and $0.04, respectively, in the same quarter last year.

Analysts expect INTC’s revenue for the second quarter (ended June 2024) to increase marginally year-over-year to $13.02 billion. However, the consensus EPS estimate of $0.10 for the same period indicates a 19.5% year-over-year decline. Nevertheless, the company has an impressive surprise history, beating the consensus revenue estimates in three of the trailing four quarters.

Stocks to Sell:

NXP Semiconductors N.V. (NXPI)

NXPI, based in Eindhoven, the Netherlands, specializes in a diverse range of semiconductor products. Its portfolio features microcontrollers, communication processors, analog and interface devices, radio frequency power amplifiers, security controllers, and semiconductor-based environmental and inertial sensors.

For the first quarter that ended March 31, 2024, NXPI’s total revenue declined 8.6% sequentially to $3.13 billion. The company’s non-GAAP operating income fell 11.4% from the last quarter to $1.08 billion. Also, NXPI’s non-GAAP net income attributable to stockholders came in at $840 million and $3.24 per common share, down 13% and 12.7% from the preceding quarter, respectively.

Street expects NXPI’s revenue and EPS for the second quarter (ended June 2024) to decrease 5.2% and 6.5% year-over-year to $3.13 billion and $3.21, respectively. This downward trajectory is forecasted to persist throughout fiscal year 2024, with revenue and EPS expected to decrease by 1.5% and 0.3%, respectively.

Infineon Technologies AG (IFNNY)

Headquartered in Neubiberg, Germany, IFNNY is a global semiconductor leader specializing in power systems and IoT. The company drives decarbonization and digitalization with its innovative semiconductor solutions across four key segments: Automotive, Green Industrial Power, Power & Sensor Systems, and Connected Secure Systems.

During the fiscal second quarter that ended March 31, 2024, IFNNY’s revenue decreased 11.8% year-over-year to €3.63 billion ($3.94 billion), while gross profit fell by 26.9% from the year-ago value to €1.40 billion ($1.52 billion). The company’s operating profit stood at €496 million ($538.38 million), down 53.8% year-over-year.

In addition, adjusted profit for the period from continuing operations attributable to shareholders of IFNNY and adjusted EPS amounted to €551 million ($598.08 million) and €0.42, respectively, reflecting a 38.8% and 39.1% decrease from the prior-year quarter.

For the quarter ended June 2024, IFNNY’s EPS is expected to decrease 39.8% year-over-year to $0.45. Its revenue for the same quarter is expected to fall 8.2% from the prior year to $4.11 billion. Analysts project a further 7.5% decline in revenue and a 30.8% decrease in EPS for fiscal year 2024.

ASML Holding N.V. (ASML)

Based in Veldhoven, the Netherlands, ASML manufactures essential semiconductor equipment for global chipmakers. It focuses on lithography, metrology, and inspection systems, including advanced solutions like extreme ultraviolet and deep ultraviolet lithography. These technologies support semiconductor production across diverse technological ranges.

ASML’s total net sales for the first quarter that ended March 31, 2024, decreased 21.6% year-over-year to €5.29 billion ($5.74 billion). Its income from operations fell 36.9% from the year-ago value to €1.39 billion ($1.51 billion), while its net income declined 37.4% from the prior year’s quarter to €1.22 billion ($1.33 billion). In addition, the company’s net income per ordinary share stood at €3.11, down 37.2% year-over-year.

Analysts expect ASML’s revenue and EPS for the second quarter (ended June 2024) to decline by 15.6% and 27.7% year-over-year to $6.53 billion and $3.99, respectively. Likewise, the company’s EPS for the fiscal year 2024 is expected to decline 4.5% from the previous year to $20.67.

 

Top Energy Stocks Amid Hurricane Season & Summer Demand

Posted on by The INO.com Team

Since April, oil has continued to trade at its highest levels, supported by robust energy demand and tight supplies. WTI crude oil futures inched up $82 per barrel yesterday, following the EIA report indicating a larger-than-expected drop in US crude stockpiles. US crude oil inventories decreased by 3.444 million barrels, surpassing the projected decline of 3 million barrels.

Meanwhile, the heightened travel and mobility and increased air conditioning usage during the summer months continue to push oil demand higher. Amid solid seasonal demand and the looming threat of hurricanes and geopolitical instability, investors could take advantage of surging oil prices by watching key energy stocks Shell plc (SHEL), BP p.l.c. (BP), Phillips 66 (PSX), and Valero Energy Corporation (VLO).

Impact of Hurricane Beryl and Potential Future Storms on Oil Production and Prices

Hurricane Beryl battered Southeast Texas with powerful winds and torrential rain, forcing the closure of oil ports, the cancellation of hundreds of flights, and leaving around 2.7 million homes and businesses without power. Beryl shut U.S. refineries and ports along the Gulf of Mexico, raising concerns about oil production and transportation disruptions. Oil output from the Gulf of Mexico is generally about 1.8 million barrels per day.

Historically, hurricanes have significantly resulted in production halts and evacuation of rigs and refineries, leading to supply constraints, which typically push oil prices upward. The impact of these weather events is two-fold: immediate supply disruption and longer-term infrastructure damage, which can keep prices elevated even after the storm has passed.

Increased Travel and Cooling During Summer Driving Higher Oil Prices

The summer season traditionally sees a surge in travel and mobility alongside air conditioning usage, driving up oil demand. This year is no exception, with intense summer demand for gasoline and jet fuel contributing to rising oil prices. OPEC maintained its forecast for robust global oil demand growth in 2024, citing resilient economic growth and a solid rebound in air travel during the summer.

In its latest Monthly Oil Market Report (MOMR), OPEC expects global oil demand to increase by 2.25 million barrels per day this year.

“Expected strong mobility and air travel in the Northern Hemisphere during the summer driving/holiday season is anticipated to bolster demand for transportation fuels and drive growth in the United States,” the agency said in the report.

Robust seasonal demand translates into higher revenues for companies involved in oil exploration, production, refining, and distribution, presenting an opportune time for investors to evaluate their energy sector portfolios.

Key Energy Stock Picks Amid Summer Demand and Tight Supply

Shell plc (SHEL)

Valued at a market cap of $228.02 billion, Shell plc (SHEL) is a prominent energy and petrochemical company. The company operates through Integrated Gas; Upstream; Marketing; Chemicals and Products; and Renewables and Energy Solutions segments.

Tobago Ltd., a subsidiary of SHEL and Shell Trinidad, recently took Final Investment Decision (FID) on the Manatee project, an undeveloped gas field in the East Coast Marine Area (ECMA) in Trinidad and Tobago. Manatee will enable Shell to competitively expand its Integrated Gas business by capitalizing on development efforts in the ECMA, one of the country’s most prolific gas-producing regions.

"This project will help meet the increasing demand for natural gas globally while also addressing the energy needs of our customers domestically in Trinidad and Tobago," stated Zoë Yujnovich, Shell’s Integrated Gas and Upstream Director.

Shell aims to expand its LNG business by 20-30% by 2030 compared to 2022. LNG liquefaction volumes are projected to increase by 25-30% relative to 2022, as outlined at the company’s Capital Markets Day in 2023.

During the first quarter that ended March 31, 2024, SHEL reported LNG sales volumes of 16.9 MT in the Integrated Gas segment. Its adjusted earnings increased 5.9% quarter-on-quarter to $7.73 billion, reflecting solid operational performance across its business. Its adjusted earnings per share was $1.20, up 8.1% from the previous quarter.

The company’s adjusted EBITDA was $18.71 billion, up 14.5% from the prior quarter. Its cash flow from operating activities (CFFO) grew 6% sequentially to $13.33 billion. Also, its free cash flow came in at $9.80 billion, an increase of 41.7% from the previous quarter.

In the last earnings release, Shell also announced that it commenced a $3.5 billion share buyback program, anticipated to be completed by the second-quarter 2024 results announcement. Over the past four quarters, total shareholder distributions amounted to 41% of CFFO.

Analysts expect SHEL’s revenue and EPS for the second quarter (ended June 2024) to increase 21.1% and 31.2% year-over-year to $90.27 billion and $1.92, respectively. For the third quarter ending September 2024, the company’s revenue and EPS are expected to grow 24.5% and 14.3% year-over-year to $95.06 billion and $2.13, respectively.

Over the past six months, shares of SHEL have surged more than 15% and approximately 21% over the past year.

BP p.l.c. (BP)

With a $100.95 billion market cap, BP p.l.c. (BP) engages in the production of natural gas, and integrated gas and power; trading of gas; operation of onshore and offshore wind power, as well as hydrogen and carbon capture and storage facilities; and production of crude oil. It operates through Gas & Low Carbon Energy; Oil Production & Operations; and Customers & Products segments.

On June 13, BP’s subsidiary, Archaea Energy, and Republic Services, Inc. (RSG) celebrated the first renewable natural gas (RNG) plant in the companies’ Lightning Renewables joint venture (JV). The Archaea Modular Design (AMD) plant at Republic’s National Serv-All Landfill in Fort Wayne, Indiana, is the first of nearly 40 landfill gas-to-RNG projects targeted by the JV and is expected to come online this summer.

The Lightning Renewables JV portfolio supports Archaea’s goal of increasing production to more than 50 million mmBtu per year by 2030.

Also, in April, BP, as the operator of the Azeri-Chirag-Gunashli (ACG) project, announced the start-up of oil production from the new Azeri Central East (ACE) platform. This platform is part of the ACG field development in the Azerbaijan sector of the Caspian Sea and is the first remotely operated offshore platform in the Caspian.

In the first quarter that ended March 31, 2024, BP’s reported production from the Oil Production & Operations segment was 1,463 mboe/d, up 7.6% from the first quarter of 2023. Its upstream production grew 2.1% year-over-year. Its underlying replacement cost (RC) profit was $2.72 billion, or $16.24 per share, respectively.

Furthermore, the company’s adjusted EBITDA for the quarter was $10.31 billion. Profit for the period attributable to BP shareholders rose significantly quarter-on-quarter to $2.26 billion.

“We’ve delivered another resilient quarter financially and continued to make progress on our strategy. Oil production was up and our ACE platform in the Caspian is now producing. We are simplifying and reducing complexity across bp and plan to deliver at least $2 billion of cash cost savings by the end of 2026 through high grading our portfolio, digital transformation, supply chain efficiencies and global capability hubs,” said BP’s CEO, Murray Auchincloss.

Moreover, the $1.75 billion share buyback program announced for the first quarter of 2024 was completed on May 3, 2024, part of the company’s $3.5 billion commitment for the first half of 2024. A resilient dividend is BP’s top priority within its disciplined financial frame. For the first quarter, the company announced a dividend per ordinary share of 7.27 cents ($0.0727).

Street expects BP’s revenue for the second quarter (ending June 2024) to increase 4.4% year-over-year to $50.65 billion. The consensus EPS estimate of $1.07 for the current year indicates an improvement of 19.7% year-over-year. Additionally, BP’s stock has gained marginally over the past six months.

Phillips 66 (PSX)

With a market cap of $56.54 billion, Phillips 66 (PSX) is a leading energy manufacturing and logistics company. It operates in four segments: Midstream; Chemicals; Refining; and Marketing and Specialties (M&S).

In May, Phillips 66 agreed to acquire Pinnacle Midland Parent LLC from Energy Spectrum Capital to expand its natural gas gathering and processing footprint in the Midland Basin. Pinnacle’s assets consist of 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. 

Pinnacle is a bolt-on asset that enhances PSX’s wellhead-to-market strategy and complements its diverse and integrated asset portfolio. Moreover, this acquisition aligns with its long-term goals of expanding its natural gas liquids value chain, maintaining disciplined capital allocation, and creating sustainable value for its shareholders.

On April 3, the Board of Directors of Phillips 66 declared a quarterly dividend of $1.15 per share, representing an increase 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.

Since its formation in 2012, PSX has consistently raised 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.

During the first quarter that ended March 31, 2024, PSX posted revenue of $36.44 billion, exceeding analysts’ expectations 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 under its credit facility.

In addition, 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.

Shares of PSX have surged around 3% over the past six months and more than 33% over the past year.

Valero Energy Corporation (VLO)

Valued at a market cap of $47.65 billion, Valero Energy Corporation (VLO) manufactures, markets, and sells petroleum-based and low-carbon liquid transportation fuels and petrochemical products internationally. The company operates through Refining; Renewable Diesel; and Ethanol segments.

VLO owns 15 petroleum refineries in the U.S., Canada, and the United Kingdom, with a total throughput capacity of about 3.2 million barrels per day. Additionally, Valero is a joint venture partner in Diamond Green Diesel Holdings LLC, which owns two renewable diesel plants in the Gulf Coast region with a combined production capacity of nearly 1.2 billion gallons per year.

Valero also owns 12 ethanol plants in the Mid-Continent region, with a combined production capacity of around 1.6 billion gallons per year.

In the last earnings report, the company provided a strategic update on the Sustainable Aviation Fuel (SAF) project at the DGP Port Arthur plant. The project is progressing ahead of schedule and will likely be operational in the fourth quarter of 2024. It is anticipated that this will give the plant the flexibility to upgrade about 50% of its current 470 million gallons annual renewable diesel production capacity to SAF. Once completed, DGD is expected to become one of the world’s largest SAF manufacturers.

VLO reported revenues of $31.76 billion for the first quarter that ended March 31, 2024. The company’s net income and earnings per common share were $1.33 billion and $3.75, respectively. Net cash provided by operating activities was $1.80 billion for the quarter.

During the quarter, Valero returned $1.4 billion to stockholders, including $356 million paid as dividends and $1 billion as the purchase of about 6.6 million shares of common stock, resulting in a payout ratio of 74% of adjusted net cash provided by operating activities. The company paid a regular quarterly cash dividend of $1.07 per share on June 28, 2024.

VLO’s stock has soared over 16% over the past six months and is up approximately 28% over the past year.

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.