2 Energy Stocks To Pick Up Early In 2012

Despite oil stubbornly stuck at $100 and increasing saber rattling from Iran, energy stocks continue to have low valuations especially given their growth prospects. Here are two I like at current price levels.

Suncor Energy (SU) – “Suncor Energy Inc., together with its subsidiaries, operates as an integrated energy company. The company involves in the development of petroleum resource basins in Canada's Athabasca oil sands; acquisition, exploration, development, production, and marketing of crude oil and natural gas in Canada and internationally; transportation and refining of crude oil; and marketing of petroleum and petrochemical products primarily in Canada”. (Business description from Yahoo Finance)

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4 reasons Suncor is undervalued at $30 a share:

Suncor is selling near the bottom of its five-year valuation range based on P/E, P/S, P/B and P/CF.

The stock looks like it is building a technical bottom just under current price levels (See Chart)

Suncor is cheap at less than 10 times forward earnings and with a five-year projected PEG of just .43.

The stock is selling under analysts’ price targets. The consensus price target on Suncor is $43, around 40% above current levels. S&P also has a $43 price target on SU.

Pioneer Natural Resources (PXD) – “Pioneer Natural Resources Company engages in the exploration and production of oil and gas in the United States and South Africa. The company produces and sells oil, natural gas liquids (NGL), and gas. It has interests in the Spraberry field in West Texas; the Hugoton in southwest Kansas; West Panhandle fields in the panhandle region of Texas; and the Raton field in the southeast portion of Colorado”. (Business description from Yahoo Finance)

4 reasons PXD is a buy at $95 a share:

• Given the amount of M&A activity in the energy space, Pioneer’s rapidly growing production and earnings, relatively low market cap and excellent assets; it could easily make a good acquisition for a larger player.
• Pioneer is showing rapid EPS growth. It made $1.77 per share in FY2010, should make $3.77 in FY2011 and analysts expect $4.91 in earnings in FY2012.
• PXD has crushed earnings estimates for 4 straight quarters and consensus estimates for FY2011 and FY2012 have moved up in the last month.
• The median analysts’ price target on Pioneer is $115.50 and Robert W Baird just initiated coverage on PXD with an “outperform” rating.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SU over the next 72 hours.