EQT, Diamondback head Goldman's top five energy stock picks
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Goldman Sachs on Monday selected its five top energy stocks ahead of their quarterly earnings, saying it maintains a "long-term constructive" view on the sector "given strong cash flow, discounted valuation, the growing strategic value of U.S. gas/oil, and improving returns on and of capital."
Goldman recommends Diamondback Energy (NASDAQ:FANG), citing the company's shift to higher free cash flow allocations toward capital returns which "should help differentiate the company relative to peers."
Chesapeake Energy (CHK) is "on track to provide strong capital returns to shareholders and close the value gap vs. its peers," the firm said.
Goldman expects Pioneer Natural Resources (PXD) to declare an $8.24/share dividend, equating to a ~15% annualized divided yield, "which we believe can be further enhanced longer-term through modest production growth and opportunistic share repurchases."
Ovintiv (OVV) is notable because its free cash flow allocation toward share buybacks "can allow the shares to close the relative gap vs. peers."
EQT Corp. (NYSE:EQT) is well positioned to benefit from a favorable long-term natural gas outlook, Goldman said, seeing "potential for EQT shares to re-rate with further balance sheet improvement and more allocation of free cash flow toward capital returns."
EQT closed +6.5% Monday as U.S. natural gas futures jumped 5% to their highest price since June 10.