10 Energy Stocks With Upside: Analysts

NEW YORK (TheStreet) -- Halliburton (HAL) and Petroleo Brasileiro (PBR.A) are among the energy stocks expected to have greater upside potential during 2011, compared to their peers.

China's solar stocks ReneSola ( SOL), JA Solar Holdings ( JASO) and Trina Solar ( TSL) top the list with great upside. Although Yingli Green Energy Holdings ( YGE) and LDK Solar ( LDK) have upsides 36% and 33%, we did not include them in this list based on a lower percentage of buy ratings.

The upside for these 10 stocks is in the range of 29%-85% over the next 12 months. Meanwhile, integrated oil and gas giants Exxon Mobil ( XOM), Chevron ( CVX), BP ( BP) and ConocoPhillips ( COP) have upside values in the range of -2% to 7%, as implied by the consensus estimates of price targets.

The stocks are stacked by upside, from great to greatest.

10. Halliburton is a leading provider of energy services and engineering and construction support, as well as a manufacturer of products for the energy industry.

During 2011, margin improvements from overseas operations will likely boost the company's earnings. The strategic decision to partner best-capitalized dry gas producers will improve Halliburton's returns, even if natural gas prices hover around $3.30 per MMBtu, according to a JPMorgan report.

Analysts polled by Bloomberg anticipate Halliburton to report earnings of $1.99 per share for 2010, $2.71 per share for 2011, and $3.15 per share for 2012, up from $1.28 per share in 2009. For 2010 third quarter, earnings were 75 cents per share, in comparison to 70 cents and 53 cents reported during the quarter-ago and year-ago periods, respectively.

During the past 12 months, the return-on-equity was 16.1%, while Schlumberger ( SLB), National-Oilwell Varco ( NOV), Baker Hughes ( BHI), Weatherford International ( WFT), Transocean ( RIG), Rowan Companies ( RDC), and Superior Energy Services ( SPN) had RoEs of 16.0%, 11.0%, 5.4%, 0,.5%, 12.2%, 8.5%, and -2.8%, respectively.

Of the 35 analysts covering the stock, 32 recommend buying, while 3 advise holding. Analysts polled by Bloomberg expect the stock to gain around 29% during 2011, with a consensus 12-month target price of $50.9.

9. Helix Energy Solutions ( HLX) is a marine contractor and operates offshore oil and gas properties and production facilities.

For 2010 fourth quarter, analysts polled by Bloomberg expect the company to report earnings of 15 cents per share, compared to a loss of 52 cents in the year-ago period. Helix Energy will return to profitability with earnings per share of 73 cents for 2011 and 95 cents for 2012, from the anticipated loss of 61 cents for 2009, according to analysts polled by Bloomberg.

The stock will likely provide an upside of 29% during 2011 with a consensus 12-month target price of $15.5, according to analysts polled by Bloomberg. In comparison, Cameron International ( CAM), FMC Technologies ( FTI), Pride International ( PDE), and McDermott International ( MDR) have upsides of 13%, 1%, 12% and 12%, respectively.

8. Petroleo Brasileiro is the largest integrated oil and gas company in Brazil and is well positioned to benefit from Brazil's rising energy consumption.

With government putting a price control mechanism in place, Petrobras is more resistant to price volatility, a factor that impacts the earnings of U.S.-based refiners. The company's expertise in deepwater drilling is an added advantage, compared to other oil majors.

During the final week of 2010, the stock surged 10.4% after Petrobras announced a record average oil production of 2.12 million barrels a day during December, up 4.4% from November. Nonetheless, the stock will likely provide an upside of 29% during 2011, according to analysts polled by Bloomberg.

In contrast, Royal Dutch Shell ( RDS.A), Eni S.p.A. ( E), Imperial Oil ( IMO), China Petroleum & Chemical (Sinopec) ( SNP), and Tenaris ( TS) have upsides of 12%, 21%, 4%, 23% and 13%, respectively.

7. InterOil ( IOC) is an integrated oil and gas company, producing jet fuel, diesel, gasoline and naphtha.

The stock has an upside of 32% with a consensus 12-month target price of $101.3, according analysts polled by Bloomberg. In comparison, Marathon Oil ( MRO), Hess ( HES), and Murphy Oil ( MUR) have upsides of 1%, 1% and -4%, respectively, based on consensus estimates of price targets compiled by Bloomberg.

Analysts polled by Bloomberg expect InterOil to return to profitability, with earnings of 73 cents per share during 2011, over the anticipated loss of 3 cents per share for 2010. Analysts estimate the company to report earnings of 12 cents per share for fourth-quarter 2010, compared to a loss of 33 cents reported for both the year-ago and quarter-ago periods.

Of the four analysts covering the stock, three recommend buying and one says hold.

6. Petrohawk Energy ( HK) is an oil and natural gas company engaged in exploration and production. The company is currently focusing on South Texas, Louisiana and central California.

During the third quarter of 2010, the company produced an average 685 million cubic feet natural gas equivalent (MMcfe) per day, up 10% sequentially and 34% year-over-year, beating the guidance of 650-660 MMcfe per day.

For 2010 fourth quarter, Petrohawk is likely to report earnings of 29 cents per share, up from 23 cents per share and 16 cents per share reported in the quarter-ago and year-ago periods, respectively, according to analysts polled by Bloomberg.

The company plans to shift its capital spending to accelerate drilling activities in the Eagle Ford Shale position and reduce capital allocated to pure natural gas. The management expects a year-over-year production growth rate of 30%-40% for 2011.

The stock has an upside of 36%, with a 2011 target price of $25.5, according to analysts polled by Bloomberg. In comparison, Apache ( APA), Anadarko Petroleum ( APC), Devon Energy ( DVN), EOG Resources ( EOG), Chesapeake Energy ( CHK) and Noble Energy ( NBL) have upsides of 4%, 2%, 11%, 9%, 6% and 7%, respectively, during 2011, based on consensus estimates of price targets.

Of the 29 analysts covering the stock, 22 recommend buying, and seven rate holding.

5. TransAtlantic Petroleum ( TAT) explores and produces crude oil and natural gas and holds interests in energy properties in Turkey, Morocco, Romania and California.

Total oil and gas revenues reached $45.5 million during the first nine months of 2010, up from $17.8 million reported for the same period in 2009. For 2010 fourth quarter, analysts polled by Bloomberg expect the company to report earnings of 2 cents per share, in comparison to a loss of 3 cents per share in the year-ago period.

Analysts polled by Bloomberg expect TransAtlantic to return to profitability, with earnings of 5 cents per share during 2011, in comparison to the anticipated loss of 12 cents per share for 2010 and reported loss of 29 cents per share for 2009.

Of the five analysts covering the stock, four recommend buying, while one advises selling. Analysts polled by Bloomberg expect the stock to gain around 37% during 2011, with a consensus 12-month target price of $4.4.

4. STR Holdings ( STRI) manufactures solar power modules encapsulants.

Happoalim Securities initiated the stock and has assigned a buy rating, as STR offers lower-risk exposure solar PV unit growth. STR Holdings, unlike its peers, is insulated from pricing and cost pressures. Analysts anticipate volume growth to drive earnings and cash flows, supporting an upside in the stock.

According to analysts polled by Bloomberg, the company is likely to report earnings per share of $1.15, $1.36, and $1.61 for 2010, 2011 and 2012, respectively, a significant turnaround from earnings of 61 cents per share reported for 2009.

Of the 10 analysts covering the stock, 6 recommend buying, while four advise holding. Analysts polled by Bloomberg expect the stock to gain around 38% with a consensus 12-month target price of $26.6.

3. China's Trina Solar manufacturers solar power products including photovoltaic wafers, ingots, cells and modules.

During 2010 third quarter, earnings per share were $1.08, up from 52 cents reported in the earlier quarter. Solar module shipments were 291MW, surpassing the company's guidance of 250-260MW, jumping 130% year over year. Meanwhile, net revenue was $508 million, up 37.1% sequentially and 103.5% year over year. Gross margin was healthy at 37.6%, above the company's mid-30s guidance.

Commenting on the outlook, Jifan Gao, chairman and CEO of Trina Solar said in a statement, "We expect that demand for our products will outpace our planned capacity expansion in 2011. Our expansion will allow us to increase sales in high-growth PV markets such as the United States and Japan, while expand our presence and sales in Australia and other emerging solar markets. We expect continuous gain in market share linked to our sales strategy and our emphasis on quality in our existing and new PV products and solutions."

During the past 12 months, the return-on-equity was 26.0%, surpassing competitors. China Sunergy ( CSUN), Solarfun Power Holdings ( SOLF), LDK Solar ( LDK), Yingli Green Energy ( YGE) and First Solar ( FSLR) have ROEs of 17.3%, 12.2%, 17.0%, 11.3% and 22.6%, respectively.

Of the 32 analysts covering the stock, 27 recommend buying, 2 holding, while 3 advise selling.

2. China's JA Solar manufactures solar cells.

For the 2010 third quarter, earnings per share were 47 cents, in comparison with the 18 cents per share and 10 cents per share reported during the quarter-ago and year-ago periods, respectively. The company's shipments were up 34% sequentially to 418MW, above the guided 375MW. JA Solar has increased 2010 guidance to 1.45GW from 1.35GW.

Reviewing the results, Dr. Peng Fang, CEO of JA Solar said in a statement, "JA Solar has achieved the one gigawatt shipment milestone in the first three quarters of 2010 and we will continue to deliver high-quality, technologically advanced photovoltaic products to fulfill the fast-growing global demand for clean energy. We continued to strengthen our market leadership by expanding our annual cell manufacturing capacity to 1.8 gigawatts at the end of September, and we recently reached 1.9 gigawatts of solar cell capacity, ahead of our capacity expansion schedule."

For 2011, the company has already signed agreements for shipments exceeding 1.2GW, improving JA Solar's order visibility. The company scores over competitors in meeting its capital obligations through low-cost borrowings. Going forward, JA Solar will likely improve market share through "SECIUM" solar cells, which are expected to yield an effective efficiency of 25%.

Of the 23 analysts covering the stock, 14 recommend buying, 6 holding, and 3 selling.

1. China's ReneSola is a leading manufacturer of solar wafers and solar power products. China accounts for around three-fifths of the company's revenues.

For the 2010 third quarter, net revenue was a record $358.7 million, up 41.3% from the second quarter, on the back of record solar shipments of 325MW, up 26% sequentially. Meanwhile, operating margins jumped 24.1%, compared to 20.6% in the quarter-ago period. "Continuous cost reduction efforts, coupled with robust market demand, has led us to deliver another quarter of impressive financial and operating results," said Xianshou Li, ReneSola's chief executive officer, in a statement.

The management expects solar wafer and module shipments of 1.13GW-1.15GW for 2010, a 42% year-over-year gain, and 1.6GW-1.7GW for 2011, representing a 48% year-over-year increase.

ReneSola is likely to report earnings of 86 cents per share for 2010 and $1.46 cents per share for 2011, according to analysts polled by Bloomberg, a significant turnaround from losses of 42 cents in 2008 and 43 cents in 2009.

The stock is trading at an attractive forward PE multiple of 4.9, while peers Kyocera ( KYO), MEMC Electronic Materials ( WFR), Suntech Power Holdings ( STP) and Canadian Solar ( CSIQ) are trading at higher PE multiples of 14.7, 26.0, 12.1 and 10.2, respectively.

Of the 14 analysts covering the stock, 12 recommend buying, 1 holding, while 1 advises selling.

>To see these stocks in action, visit the 10 Energy Stocks With Upside portfolio on Stockpickr.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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