GS: Which H1 stock laggards could be set for a reversal?
Goldman Sachs analysts identified several first-half energy, utilities and mining stock laggards with the potential to become leaders in the second half of the year.
In a note Monday, the bank's analysis suggests that these stocks may benefit from various catalysts and improvements in market conditions, setting the stage for a reversal in performance.
Cheniere Energy (NYSE:LNG): Cheniere Energy lagged in H1 2024, up only 2% compared to the Alerian MLP Index (AMNA) at 13%, mainly due to a softer international gas price outlook, notes Goldman. However, a recent capital allocation update has sparked a recovery, with the stock gaining 17% since the announcement. Goldman Sachs sees further catalysts, including the pace of 2Q24 buybacks and updates on Corpus Christi Stage 3, which could support continued performance recovery for the rest of the year.
Sempra Energy (NYSE:SRE): Sempra has underperformed the Utilities Select Sector SPDR Fund (XLU) by 7% year-to-date (YTD) due to uncertainties around its LNG business and wildfire risks in Texas. However, Goldman Sachs expects potential outperformance in 2H as earnings execution improves and clarity emerges on the Oncor utility's system resiliency plan and California utilities' rate case decision.
Enphase Energy (NASDAQ:ENPH): Despite holding up relatively well compared to other clean technology stocks, the bank notes Enphase is still down significantly in H1. Goldman Sachs anticipates a recovery in the US residential solar market and ongoing share gains for Enphase, potentially leading to better returns in 2H. Key indicators to watch include 2Q earnings guidance and commentary on volume uplift and channel destocking.
Kosmos Energy (NYSE:KOS): Kosmos Energy has lagged broader energy stocks, down 10% versus the Energy Select Sector SPDR Fund (XLE (NYSE:XLE)), up 16% over the past six months. Goldman Sachs sees potential for a positive shift in 2H, driven by operational milestones at the Tortue project and expectations for significant free cash flow generation.
SLB: SLB has underperformed the XLE YTD, reflecting tempered international activity expectations. Goldman Sachs believes that solid global upstream capex should support SLB's growth, with potential positive catalysts including continued strong margin performance and substantial share repurchases.
EQT (ST:EQTAB): The bank explains that EQT has underperformed the E&P sector year-to-date given the impacts of the pending acquisition of ETRN announced in March of this year. However, Goldman Sachs says the company's emphasis on the interest of several participants in the basin and successful completion of additional asset sales beyond that with Equinor should address the company's higher leverage structure. "In our view, the current stock price dislocation provides an attractive entry point into the long-term company strategy continues that continues to focus on lowering the cost structure," they wrote.
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