Yahoo Finance Here's Why Hold Strategy is Apt for Eni (E) Stock Right Now
Eni SpA E has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.
Factors Driving the Stock
Favorable Style Score
Eni has an impressive Value Score of B. Value Score helps find stocks that are undervalued. Back-tested results have shown that stocks with a favorable Value Score, combined with a solid Zacks Rank, are the best investment bets.
Attractive Shareholder Distributions
Eni's financial strategy includes robust shareholder returns through dividends and share buyback programs. In 2023, the company returned €4.8 billion to shareholders, including €3 billion in dividends and €1.8 billion in buybacks. The 2024 guidance indicates a continuation of this trend, with a projected increase in cash flow from operations and a commitment to distributing 30-35% of CFFO to shareholders. This approach ensures that investors benefit directly from Eni's strong financial performance and strategic growth initiatives.
Strategic Acquisitions & Expansions
The acquisition of Neptune Energy, completed in January 2024, is a milestone that enhances Eni’s upstream portfolio. This acquisition is synergistic with Eni's gas assets and is expected to contribute 4 bcm per year of gas to the European market. This move aligns with Eni’s goal to have 60% of its production from natural gas by 2030, highlighting the company's focus on low-emission intensity assets, thereby supporting its decarbonization targets.
Renewable Energy Initiatives
Eni is aggressively expanding its renewable energy footprint, with plans to grow installed renewable capacity to more than 8 GW by 2027. The strategic investments in photovoltaic (PV) parks in the United States and Spain, along with the joint venture with LG for a biorefinery in South Korea, reflect Eni's commitment to diversifying its energy portfolio and reducing carbon emissions. These projects are expected to drive long-term growth and align with global sustainability goals.
Optimistic Outlook for 2024
For 2024, the company forecasts the hydrocarbon production in the exploration and production segment between 1.69 million and 1.71 million barrels of oil equivalent per day, based on a revised Brent price of $86 per barrel. The metric indicates an increase from the 1.66 million barrels of oil equivalent per day reported in 2023.
Key Business Tailwinds
Eni’s diversified business model, which integrates traditional oil and gas operations with renewable energy and biorefining, positions the company for sustainable growth. The transition to cleaner energy sources is evident through projects like the Baleine oilfield in Côte d'Ivoire, Africa's first Net Zero emissions project, and the expansion of biorefining capacity. This balanced approach ensures stability and resilience against market volatility.
Eni has strengthened its position as a key player in the global gas market through long-term LNG agreements with countries like Congo, Indonesia and Qatar. These agreements will ensure up to 6.8 bcm/y of gas supplies between 2025 and 2026, supporting Eni's commercial plans and upstream-midstream integration strategy. Additionally, Eni’s proactive approach to reducing the reliance on Russian gas without compromising supply security demonstrates its strategic foresight and operational agility.
Eni's exploration strategy focuses on gas discoveries in near-field areas, aligning with its production mix targets and emission reduction goals. Notable successes include the Geng discovery in Indonesia, the largest in the industry in 2023, and new finds in Egypt, Congo and Mexico. These exploration achievements, combined with the integration of Neptune assets, are expected to drive a production growth rate of 3-4% per year until 2027, reinforcing Eni’s position as a leading energy producer.
Eni's ability to execute projects efficiently is demonstrated by the rapid production start of the Baleine oilfield and the Congo Floating LNG project, which shipped its first cargo in February 2024. The company's fast-track model reduces reserve time-to-market, enhancing return on investment and operational efficiency. This capability to deliver complex projects swiftly and effectively is a critical competitive advantage in the energy sector.
Risks
The company's upstream operations are highly susceptible to significant fluctuations in oil and natural gas prices. Elevated oil prices have notably increased the input costs for the company's refining business, affecting its profitability. Additionally, Eni's downstream operations, particularly refining, face substantial cost pressures due to the high prices of crude oil, which is the primary input.
Zacks Rank and Stocks to Consider
Eni currently carries a Zacks Rank #3 (Hold).
Investors interested in the energy sector may look at some better-ranked stocks like Transportadora TGS, Sunoco LP SUN and GeoPark Ltd. GPRK, each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Transportadora’s midstream asset portfolio has Latin America's most extensive natural gas pipeline network. It generates stable fee-based revenues since its pipeline assets transport more than 60% of the gas consumed in Argentina.
Transportadora has witnessed upward estimate revisions for its 2024 bottom line in the past 60 days. The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at 77 cents and $1.81, respectively. TGS currently has a Growth Score of A and B for Value.
Sunoco is a leading wholesale motor fuel distributor in the United States, boasting a vast distribution network spanning 40 states. With long-term contracts servicing more than 10,000 convenience stores, it distributes more than 10 fuel brands, ensuring a stable revenue stream.
The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $7.29 and $7.17, respectively. The partnership has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days. SUN currently has a Value and Growth Score of A.
GeoPark, based in Hamilton, Bermuda, is an explorer, operator and consolidator in the oil and gas sector. The company primarily operates in Chile, Colombia, Brazil and Argentina. It has a Zacks Style Score of A for Value and B for Growth.
The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $3.23 and $3.98, respectively. The company has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.
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Eni SpA (E) : Free Stock Analysis Report
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