February 14, 2017
After years of lackluster performance, the energy sector is primed for a comeback. Between the strong U.S. dollar, high crude oil inventories and increasing seasonal demand, oil prices are expected to stabilize in the coming months. Better yet, it looks like the U.S. will finally have a pro-business, cohesive strategy that will lead the country to energy independence.
This, coupled with better year-over-year comparisons for sales and earnings, should support the energy sector later in 2017. However, before you start buying energy stocks, I still recommend that you approach this new opportunity with a stock picker's eye. There are still plenty of energy companies there that are struggling fundamentally and aren't good buys just yet.
Keeping this in mind, I recommend that you run all potential new buys through Portfolio Grader, my stock rating tool. This will help you determine a stock's potential as a growth opportunity. And if you want to assess a dividend stock, my Dividend Grader is designed to do just that. If one of your stocks rates highly in both Portfolio Grader and Dividend Grader, that's a great starting point.
A great example of this is CONE Midstream Partners LP (CNNX), which is a master limited partnership (MLP) that operates natural gas properties in the Marcellus Shale area of Pennsylvania and West Virginia. The company currently has gathering agreements for about 496,000 net acres for an initial term of 20 years.
In the third quarter, CONE Midstream Partners reported that net income increased nearly 20% year-over-year to $23.6 million. Earnings per share were $0.40, which topped estimates for $0.37 per share by 8.1%. Thanks to the strong quarter, company management upped its full-year 2016 guidance.
I'm expecting a repeat performance with CONE Midstream's fourth-quarter report, which will be released before the market opens on Thursday, February 16. The analyst community is forecasting $0.38 EPS on $62.49 million in sales. While earnings are expected to be unchanged from last quarter, sales are expected to improve 6.3%. Also, the consensus EPS estimate has been revised higher by 2.7% in recent weeks, so it's quite likely that CONE Midstream will once again beat expectations.
Along with its solid fundamentals, CONE Midstream Partners has paid a dividend for seven-straight quarters. The stock recently went ex-dividend on February 2, but we can expect another dividend to be announced in early April. CNNX currently has a 4.52% dividend yield and a good track record of dividend growth.