10 Energy Stocks Analysts Favor

NEW YORK (TheStreet) -- Anadarko Petroleum (APC), Marathon Oil (MRO) and Murphy Oil (MUR) are among energy stocks that received an adjusted earnings per share upgrade on fourth-quarter estimates over the past four weeks.

The earnings for these 10 energy stocks were upgraded in the range of 4%-25% during the past four weeks. In comparison, analysts upgraded earnings per share of Exxon Mobil ( XOM), Chevron ( CVX), BP ( BP) and ConocoPhillips ( COP) by around 3.1%, 3.2%, 3.9% and 1.7%, respectively.

We have not included TransAtlantic Petroleum ( TAT), Holly ( HOC), Valero Energy ( VLO), Penn West Energy Trust ( PWE), Nexen ( NXY) and Petrobras ( PBR) in this list, although they received a weighty EPS revision, because only a few analysts cover these stocks for adjusted earnings per share upgrade.

Additionally, we have not included Atlas Energy ( ATLS), which has a downside of 2% and buy ratings of 9%, and Concho Resources ( CXO), which has a downside of 2%, as per the estimated price target of analysts polled by Bloomberg.

Analysts expect the following 10 stocks to provide attractive investment returns during 2011, based on the upside implied from their respective 12-month price targets. Additionally, most of these stocks received favorable buy recommendations.

The stocks are stacked by percentage of EPS upgrade in ascending order.

10. SM Energy ( SM) is an independent energy company focusing on the exploration, development, acquisition, and production of natural gas and crude oil.

Consensus estimates for 2010 fourth quarter earnings per share (adjusted) reached 31 cents on Jan. 20 from 22 cents as of Dec. 8. Analysts polled by Bloomberg. expect the company to report earnings of $2.74 per share for 2010, a significant turnaround from a loss of $1.59 per share in 2009.

The stock has surged 58% during the past one year, while Chesapeake Energy ( CHK), Southwestern Energy ( SWN) and Linn Energy ( LINE) returned around 1%, -18%, and 36%, respectively.

The stock is expected to gain 1% with a 12-month target price of $58.7, based on consensus estimates of analysts polled by Bloomberg. Of the 17 analysts covering the stock, 10 recommend buying and 7 rated holding.

9. Talisman Energy ( TLM) is engaged in exploration, development, production, transportation and marketing of crude oil, natural gas and natural gas liquids.

Consensus estimates for 2010 fourth quarter earnings per share (adjusted) reached 19 cents on Jan. 19 from 18 cents as of Jan. 10. Talisman energy is likely to report earnings of 88 cents per share for 2010, $1.12 per share for 2011 and $1.43 per share for 2012, from a loss of 70 cents per share in 2009, say analysts polled by Bloomberg.

The stock is expected to gain 14% with a 12-month target price of $25.3, based on the consensus estimates of analysts polled by Bloomberg. PetroChina ( PTR), Suncor Energy ( SU), Repsol YPF ( REP), CNOOC ( CEO), Statoil ( STO) and Occidental Petroleum ( OXY) have upsides of -11%, 12%, 10%, 3%, 3% and 9%, respectively.

Of the 25 analysts covering the stock, 16 recommend buying, and 9 rated holding.

8. Murphy Oil ( MUR) produces oil and natural gas in the U.S., Canada, the U.K., Malaysia and has exploring activities worldwide.

The company is scheduled to report its 2010 fourth quarter results on Jan. 26. Consensus estimates for 2010 fourth quarter earnings per share (adjusted) reached $1.05 on Jan. 18 from 85 cents as of Dec. 29. Analysts polled by Bloomberg foresee Murphy reporting earnings of $4.34 per share for 2010, $5.89 per share for 2011 and $6.36 per share for 2012, a significant improvement from earnings of $3.85 cents per share in 2009.

Over the past 12 months, the return-on-equity stood at 12.3%. In comparison, Hess ( HES), Valero Energy ( VLO), Sunoco ( SUN), Eni ( E), Canadian Natural Resource ( CNQ) and Apache ( APA) have ROEs of 5.8%, -13.1%, -12.2%, 9.6%, 8.3% and -1.8%, respectively.

The stock is expected to gain 4% with a 12-month target price of $75.8, based on the consensus estimates of analysts polled by Bloomberg. Of the 18 analysts covering the stock, 8 recommend buying, 7 rated holding and 3 advised selling.

7. Marathon Oil ( MRO) is an integrated international energy company engaged in exploration and production, oil sands mining, integrated gas and refining, transportation and marketing.

The company is scheduled to announce its 2010 fourth quarter results on Feb. 2. Consensus estimates for 2010 fourth quarter earnings per share (adjusted) reached 94 cents on January 20, compared to 77 cents as of Dec. 3. Analysts polled by Bloomberg expect the company to report earnings of $3.71 per share for 2010, $4.81 per share for 2011 and $5.01 per share for 2012, a significant turnaround from earnings of $1.67 cents per share in 2009.

Last week, the company announced plans to spin off its downstream business, creating two independent energy companies. Commenting on the benefits of spinning off, Gary R. Heminger, Marathon Oil executive vice president (downstream) said in a press release, "With a fully aligned downstream business Marathon Petroleum Corporation will have the ability to pursue a strategy specific to the strengths we have developed over many years."

Year-to-date, the stock has advanced around 13.6%, leading the pack of energy giants. In comparison Royal Dutch Shell ( RDS.A), Total ( TOT), China Petroleum & Chemical Corporation (Sinopec) ( SNP), Ecopetrol ( EC) and Schlumberger ( SLB) returned around 2.2%, 6.5%, 7.6%, -0.1% and 3.3%, respectively.

The stock is expected to gain 15% with a 12-month target price of $48.3, based on consensus estimates of analysts polled by Bloomberg. Of the 24 analysts covering the stock, 13 recommend buying, 10 advise holding and 1 rates selling.

6. SandRidge Energy ( SD) is an oil and natural gas company focusing on exploration and production.

Consensus estimates for 2010 fourth quarter loss per share (adjusted) reached 7 cents on January 18 from a loss per share of 8 cents as of Jan. 6. Analysts polled by Bloomberg expect the company to report earnings of 83 cents per share for 2010, a significant turnaround from loss of $10.20 per share in 2009.

During 2010 third quarter, oil production increased 65% sequentially and 207% year-over-year. Meanwhile, earnings per share were 73 cents per share during the quarter, compared to the 58 cents per share reported a year earlier. Commenting on the outlook, Tom L. Ward, Chairman and CEO said "We estimate oil production to increase over 50% from 2010 to 2011 and that oil will generate approximately 75% of our 2011 sales."

Based on the consensus estimates of analysts polled by Bloomberg, the stock is likely to gain 5% with a 12-month target price of $7.9. Of the 22 analysts covering the stock, 10 recommend buying, 11 rated holding, and 1 advised selling.

5. Plains Exploration & Production ( PXP) is an independent oil and gas company engaged in acquiring, developing, exploring and producing oil and gas in California, Texas, Louisiana and Gulf of Mexico.

Consensus estimates for 2010 fourth quarter earnings per share (adjusted) reached 31 cents on Jan. 20, up from 27 cents as of Jan. 3. Analysts polled by Bloomberg foresee the company reporting earnings of $1.20 per share for 2010, $1.83 per share for 2011 and $2.28 per share for 2012, from earnings of $1.09 cents per share in 2009 and loss of $6.52 per share in 2008.

Based on analysts' consensus estimates, the stock is likely to gain 17% with a 12-month target price of $39.9. Upsides for stocks such as Plains All American Pipeline ( PAA), Imperial Oil ( IMO), Devon Energy ( DVN), Sasol ( SSL), Enterprise Products Partners ( EPD) and TransCanada ( TRP) are 3%, 3%, 8%, -24%, 5% and 12%, respectively.

Of the 18 analysts covering the stock, 12 recommend buying and 6 rate holding.

4. Denbury Resources ( DNR) is an independent oil and gas company engaged in acquisition, development, operation and exploration.

Analysts' consensus estimates for 2010 fourth quarter earnings per share (adjusted) reached 20 cents on Jan. 20, up from 15 cents as of Dec. 6. Denbury is expected to report earnings of 89 cents per share for 2010, from a loss of 30 cents per share in 2009, as per analysts polled by Bloomberg.

The stock is seen gaining 17% with a 12-month target price of $22.5, based on the consensus estimates of analysts polled by Bloomberg. Swift Energy ( SFY), EOG Resources ( EOG), Cenovus Energy ( CVE), EnCana ( ECA) and Kinder Morgan Energy Partners ( KMP) have upsides of 8%, 2%, 9%, 4% and 1%, respectively.

Of the 20 analysts covering Denbury, 12 recommend buying and 8 rate holding.

3. Oasis Petroleum ( OAS) is an independent exploration and production company pursuing acquisition and development of unconventional oil and natural gas resources.

Consensus estimates for 2010 fourth quarter earnings per share (adjusted) reached 13 cents on Jan. 18 from 11 cents as of Dec. 17. Analysts polled by Bloomberg foresee the company reporting a loss of 20 cents per share for full year 2010, weighed down by a loss of 20 cents per share and 2 cents per share registered in the second quarter and third quarters, respectively. Going forward, earning per share will likely improve to a robust 89 cents per share in 2011 and $1.42 per share in 2012.

For the third quarter, Oasis petroleum registered a 149% year-over-year production growth and acquired around 16,700 acres in the Williston Basin, Montana. "We continue to execute on our drilling plans and now have five rigs running in the Williston Basin," said Thomas B. Nusz, Oasis' Chairman and CEO, in a press release.

Based on the consensus estimates of analysts polled by Bloomberg, the stock is likely to gain 4% with a 12-month target price of $30.5. Among analysts (16) covering the stock, 9 recommend buying and 7 rate holding.

2. Anadarko Petroleum ( APC) is ranked among the leading independent oil and natural gas exploration and production companies in the world.

Anadarko is scheduled to announce its 2010 fourth quarter results on Jan. 31. Consensus estimates for 2010 fourth quarter earnings per share (adjusted) reached 27 cents on Jan. 19 from 11 cents as of Dec. 17. Based on analysts' estimates, Anadarko is seen reporting earnings of $1.57 per share for 2010, $2.32 per share for 2011 and $3.51 per share for 2012, from a loss of 34 cents per share in 2009.

During the fourth quarter of 2010, Anadarko announced several discoveries including natural gas offshore in Mozambique's Rovuma Basin at the Lagosta, oil offshore Sierra Leone, Brazil post-salt, and first oil at the Jubilee Field Offshore Ghana. After raising the price target to $86 on Mozambique and Brazilian discoveries, Pritchard Capital Partners' analysts report, "Its Lagosta discovery pushes the resource potential well beyond the commercial LNG development threshold, while its Itauna discovery offshore Brazil will most likely be a standalone project. These exploratory successes expand our NAV by $6 per share."

As per consensus estimates, stock is seen gaining 6% over the next 12 months with a target price of $80.9, say analysts polled by Bloomberg. Of the 30 analysts tracking the stock, 15 suggest buying, 14 holding and 1 selling the stock.

1. Energy XXI (Bermuda) ( EXXI) is an independent oil and natural gas exploration and production company.

For the quarter ended Dec. 31, 2010, consensus estimates for earnings per share (adjusted) reached 10 cents on Jan. 20, up from 8 cents as of Jan. 12.

The company announced the acquisition of Gulf Mexico Shelf oil and natural gas properties from ExxonMobil on Dec. 17, 2010, thereby doubling its reserves and production profile. According to an Energy XXI statement, "The acquired properties fit our existing assets well, adding nine fields right in the heart of our producing properties." Energy XXI chairman and CEO John Schiller said in a press release. "In addition to oil-weighted reserves and production, supported by an extensive pipeline system, this acquisition includes acreage, seismic data and field studies that will help us develop a portfolio of attractive drilling and recompletion opportunities."

Based on the consensus estimates of analysts polled by Bloomberg, the 12-month target price for the stock is $34.3, after gaining 29%. Newfield Exploration ( NFX), McMoRan Exploration ( MMR) and W&T Offshore ( WTI) have upsides of 13%, 26% and -6%, respectively.

Of the 16 analysts reviewing the stock, 15 recommend buying and 1 rates holding.

>To see these stocks in action, visit the 10 Energy Stocks Analysts Favor 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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