We recently published a list of 10 Most Profitable Energy Stocks To Invest In. In this article, we are going to take a look at where Cheniere Energy (NYSE:LNG) stands against the other most profitable energy stocks to invest in.
Global Energy Demand Set to Soar
The International Energy Agency (IEA) projects a significant increase in global energy demand, with an annual growth rate of 3.4% projected until 2026. The majority of this demand, approximately 85%, is expected to come from China and India, with India’s energy demand alone forecasted to grow at an impressive 6% annually until 2026, driven by robust economic growth and rising household consumption. Southeast Asia is also expected to experience a substantial increase in electricity demand, with a 5% annual growth rate predicted until 2026.
In contrast, the United States is expected to see a more moderate increase in electricity demand, primarily driven by the growing need for data centers. The electricity usage by data centers, artificial intelligence, and cryptocurrency is expected to double to 1,000 TWh by 2026.
However, the IEA notes that the rise in electricity generation from low-emission sources will meet global demand growth over the next three years. Renewable energy is anticipated to surpass coal as the leading energy source by early 2025, marking a significant milestone in the global transition towards cleaner energy. This shift towards renewable energy is expected to play a crucial role in meeting the world’s growing energy needs while reducing greenhouse gas emissions and mitigating the impacts of climate change.
Energy Industry to Require Balanced Approach
In an interview on CNBC on September 18, ConocoPhillips CEO Ryan Lance said that he is optimistic about the future of the energy industry. Lance highlighted that the US is well-positioned to supply the growing demand for natural gas, particularly in Europe. He noted that the shale revolution in the US has been a “remarkable” game-changer for the industry and that the country is now a major player in the global energy market. Lance also pointed out that the US has a huge natural gas supply, which provides an opportunity to keep energy prices low and support growing power demand and electrification.
In addition, Lance discussed the need for a diverse energy mix to meet growing power demand in the US and globally. He noted that while renewable energy sources are growing, they are not yet sufficient to meet demand and that other forms of energy, including coal and nuclear, will still be needed. He cited the example of California, which plans to import more electricity from coal-powered plants in South Dakota and Wyoming, despite its efforts to reduce greenhouse gas emissions. This, Lance argued, highlights the complexity of the energy landscape and the need for a balanced approach.
Lance also touched on the potential impact of interest rate decisions by the Federal Reserve on the oil and gas industry. While acknowledging that a rate cut could have some impact, Lance emphasized that what matters most is a healthy economy in the US and globally.
The growth in global energy demand poses a significant challenge, it is essential to prioritize sustainable and low-emission energy sources to meet the growing demands.
Our Methodology
For this article, we used Finviz and Yahoo Finance stock screeners plus online rankings to compile an initial list of the 80 largest companies in the energy sector by market cap. From that list, we narrowed our choices to 10 companies with positive TTM net income and 5-year net income growth from reputable sources including SeekingAlpha (which provided insights into 5-year growth rates) and Macrotrends (which supplied information on trailing twelve-month (TTM) net income). Then we sorted the stocks in ascending order, according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Close-up of a liquefied natural gas terminal expelling plumes of smoke.
Cheniere Energy (NYSE:LNG)
TTM Net Income: $4.46 Billion
5-Year Net Income CAGR: 94.80%
Number of Hedge Fund Holders: 65
Cheniere Energy (NYSE:LNG) is the largest U.S. exporter of liquefied natural gas (LNG), supplying energy to global markets. The company’s Sabine Pass and Corpus Christi facilities are key export terminals and play a vital role in meeting the growing demand for cleaner energy sources worldwide.
Cheniere Energy (NYSE:LNG) has seen impressive financial growth, driven by the increasing demand for LNG as a transition fuel in the global energy market. The company’s ownership of the largest and third-largest LNG terminals in the United States, Sabine Pass and Corpus Christi, provides a unique competitive advantage. Cheniere Energy (NYSE:LNG) has long-term contracts for 95% of the total anticipated production for the next 16 years.
The global demand for natural gas is expected to grow by 10-15% by 2030 and could increase as much as two times by 2050, driven by increased demand for electricity and industrial decarbonization. Cheniere Energy (NYSE:LNG) is well-positioned to benefit from this growth, with its LNG terminals accounting for around 11% of the total global liquefaction capacity.
Cheniere Energy (NYSE:LNG) is focused on reducing debt, declaring and growing dividends, share repurchases, and investing in production capacity growth. The company has also announced new 2027 targets, including buying back an additional 10% of its market capitalization, growing its dividend by 10%, and adding another 25 mtpa of production capacity.
Cheniere Energy’s (NYSE:LNG) unique assets and long-term contracts make it an attractive investment opportunity for those looking to invest in the energy sector. The company’s net income for the twelve months ending on June 30 was $4.46 billion, representing an impressive CAGR of 94.80%.
Overall LNG ranks 6th on our list of most profitable energy stocks to invest in. While we acknowledge the potential of LNG as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LNG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.