In recent years, artificial intelligence (AI) has emerged as a game changer across industries, driving innovation at an unprecedented pace. As the world relies on AI technology, the demand for data centers is skyrocketing to keep up with technological advancements and meet evolving needs.goldman sachs G.S. Data center power demand in the U.S. is expected to grow at a compound annual growth rate of 15% from 2023 to 2030
Natural gas fuels the behind-the-scenes AI-powered infrastructure essential to powering operations as data center needs soar and power demand soars. According to Goldman Sachs, 60% of new power demand from data centers is expected to be met by natural gas.
As natural gas prices (NGM24) rise and demand soars, the investment bank focuses on three natural gas stocks that investors may want to consider right now.
Natural Gas Inventory #1: Williams Companies
Williams Companies, Inc. WMBis a multi-segment energy infrastructure company headquartered in Tulsa. With a market capitalization of approximately $48.2 billion, the company owns and operates 33,000 miles of pipeline.
Williams stock has gained 35.9% over the past 52 weeks, outperforming the broader S&P 500 Energy sector's SPDR. XLE It rose 18.2% in the same time frame.
With a track record of quarterly dividends since 1974, this natural gas company remains focused on rewarding shareholders with dividends. On April 30th, Williams announced a quarterly dividend of $0.4750 per share, to be paid to shareholders on June 24th. The company's annual dividend of $1.90 equates to a very attractive dividend yield of 4.8%.
In terms of valuation, the company's forward P/E ratio is 21.46x, which is in line with the company's average over the past five years.
On May 6, Williams announced its first quarter results, with both sales and bottom line profits exceeding Wall Street expectations. The company's revenue was $2.8 billion, beating Wall Street expectations by 3.1%, and adjusted EPS was $0.59, up 5.4% annually, beating expectations by 20.4%.
Adjusted EBITDA for the quarter was $1.9 billion, an increase of 7.7% year-over-year, driven by strong performance in our transmission, storage and collection businesses. Additionally, Williams achieved another milestone with contracted transmission capacity of 33.9 billion cubic feet per day (Bcf/d), an annual increase of 4.3%.
Management expects 2024 Adjusted EBITDA to reach the high end of its guidance range of $6.8 billion to $7.1 billion, with capital expenditures expected to be in the range of $1.5 billion to $1.8 billion.
Analysts tracking Williams expect the company's earnings to reach $1.84 per share in fiscal 2024 and increase approximately 9.8% to $2.02 per share in fiscal 2025.
Williams stock has an overall consensus rating of Moderate Buy. Of the 22 analysts covering the stock, 7 recommend a “strong buy,” 2 suggest a “moderate buy,” 12 suggest a “hold,” and the remaining one recommends a “strong sell.” ” has been given an evaluation.
Analysts' average price target is $39.90, indicating little upside potential from current price levels. However, the high street price target of $47 suggests the stock could rise as much as 18.6%.
Natural Gas Inventory #2: Kinder Morgan
Kinder Morgan, Texas, has a market capitalization of over $42.1 billion. KMI It is an energy infrastructure entity that operates across various segments such as natural gas pipelines. product pipeline; terminal; and CO2. The company owns and manages a network of approximately 82,000 miles of pipelines and 139 terminals.
Kinder Morgan stock has increased 13.6% over the past 52 weeks and is up 8.2% year-to-date.
For the first quarter, the company approved a dividend of $0.2875 per share, payable to shareholders on May 15th. This represents a 2% year-on-year growth. The company's annual dividend is $1.15, giving it an attractive dividend yield of 6.03%.
In terms of valuation, the company is trading at a forward P/E ratio of 15.73x, which is lower than the five-year average of 16.43x. Additionally, the stock trades at 2.72 times sales, which is in line with the average over the past five years.
On April 17, the company reported first-quarter earnings results that beat Wall Street's bottom line expectations. The company's revenue reached $3.8 billion and adjusted EPS of $0.34, up 13.3% annually and beating analyst expectations by 3%. Additionally, adjusted EBITDA increased 7.1% year over year to $2.1 billion.
CEO Kim Dang highlighted the strong start to the quarter, citing increased financial contributions from the natural gas pipeline, product pipeline and terminal business segments. Looking ahead, Dunn expressed optimism for the natural gas pipeline business segment, predicting strong demand growth driven by factors such as increased LNG exports and new power generation demand.
Management expects 2024 net income to increase 15% annually to $2.7 billion, or $1.22 per share. Adjusted EBITDA is expected to increase 8% annually to $8.16 billion.
Analysts tracking Kinder Morgan expect the company's earnings to increase 10.3% year-over-year to $1.18 per share in fiscal 2024, and another 3.4% to $1.22 per share in fiscal 2025. I predict that it will.
Kinder Morgan stock has an overall consensus rating of “Average Buy.” Of the 19 analysts covering the stock, five recommend a “strong buy,” one recommends a “moderate buy,” 12 suggest a “hold,” and one recommends a “moderate buy.” It has been given a sell rating.
Analysts' average price target is $20.38, implying a potential upside of 6.8% from current price levels. However, the $23 high street price target suggests significant upside potential of 20.5%.
Natural Gas Inventory #3: EQT Corp
EQT Corporation headquartered in Pittsburgh EQT The Company is a natural gas producer primarily in the United States, and its operations include supplying natural gas and natural gas to marketers, utilities, and industrial customers through pipelines located in the Appalachian Basin. Includes selling gas liquids. The company's market capitalization is currently $17.6 billion.
EQT stock has increased 20.9% over the past 52 weeks, outpacing XLE's rise over the same period.
On April 17th, the company announced a dividend of $0.1575 per share, to be paid to shareholders on June 1st. The annual dividend of $0.63 corresponds to a dividend yield of 1.57%. The company maintains a healthy payout ratio of 38.9%, suggesting it will continue to maintain its dividend and potentially increase it.
At 2.59 times sales, the stock trades at a discount to peers such as Permian Resources. PR.
EQT Corporation's first quarter earnings report, released on April 23, was well received by investors, although it missed Wall Street's earnings expectations. As a result, the company's stock price rose nearly 3.8% in subsequent trading hours. This positive reaction can be attributed to EQT Corporation's adjusted EPS of $0.82, which beat analyst expectations by 26.2%.
In the first quarter, the company's transformational acquisition of Equitrans Midstream is expected to create one of the nation's most integrated natural gas power plants to meet the rapidly growing demand for data centers and AI. EQT's clean, reliable gas is critical to driving global growth.
Management expects total sales volumes to be between 2,100 Bcfe and 2,200 Bcfe in 2024 and maintenance capital expenditures between $1.95 billion and $2.05 billion.
Analysts tracking EQT expect the company's earnings to reach $1.03 per share in fiscal year 2024, and grow significantly by 266% to $3.77 per share in fiscal year 2025.
The consensus rating for EQT stock is a “moderate buy.” Of the 22 analysts covering the stock, 11 recommend a strong buy, one recommends a moderate buy, and the remaining 10 give it a hold rating.
The average analyst price target is $44.04, indicating a modest upside potential of 13.1% from current price levels. The high street price target of $52 suggests the stock could rise as much as 33.5%.
On the date of publication, Sristi Suman Jayaswal did not have (directly or indirectly) any positions in any securities mentioned in this article. All information and data in this article is for informational purposes only. For more information, please see the Barchart Disclosure Policy here.