Stock Up Sale
Suncor Energy Inc (TSX:SU) has been on a good run lately. Since the start of the year, it has risen 24.9%, which is a far better return than the TSX has been able to deliver in the same period. That being said, we’ve seen this show before. When oil prices go up, Suncor stock goes up. When oil prices go down, Suncor stock goes down. It’s about what you’d expect for an exploration and production (E&P) company.
Nevertheless, there are plausible reasons for thinking that oil prices will be relatively high in the years ahead. The Saudis and Russia have both cut production, the transition to renewable energy is proceeding very slowly, and many countries are still uncomfortable with nuclear energy. On top of that, oil will always be needed for chemical feedstocks. It isn’t going anywhere, and if production remains slow, then the price should rise.
With all that said, it’s possible to get a lot more growth than what’s on offer with Suncor. If you are willing to take on a little more risk, you might do better with an energy growth stock like Brookfield Renewable Corporation (TSX:BEPC). BEPC had far better revenue growth than Suncor did over the previous 12-month and 5-month periods. Its earnings growth hasn’t been quite so good, due to earnings being negative in the trailing 12 month period, but it earned big profits in 2022 and 2021. As a relatively young company with several very profitable years behind it, BEPC has a lot of potential.
What Brookfield Renewable does
Brookfield Renewable Corporation is a company that invests in renewable energy. It is functionally the same entity as Brookfield Renewable Partners, only in the form of a corporation rather than a limited partnership.
Brookfield Renewable invests in things like:
- Wind farms.
- Solar power.
- Battery storage.
- And more.
The company does not merely passively invest in such projects through securities, it operates the businesses it owns. For example, in the most recent quarter, it:
- Got contracts for 50 terawatt hours of generation with corporate clients.
- Commissioned 5,000 megawatts of new green energy worldwide, across wind, solar and storage.
- Generated $800 million from recycling initiatives.
- Invested $9 billion in capital into accretive investments.
- And more.
Brookfield has certainly been busy! And its financial results have been pretty good too. In the same quarter just mentioned, it delivered:
- $35 million in earnings attributable to common shareholders, up from $-82 million.
- $255 million in funds from operations, up 13.3%.
- $0.38 in FFO per share, up 8.57%.
Foolish bottom line
The bottom line on energy stocks is that there’s more than one game in town. Although traditional energy companies like Suncor can make a lot of money when oil prices are high, renewable energy companies in many cases grow faster. Their results also aren’t so inextricably tied to commodity prices. Over the years, governments have incentivized renewable energy projects with valuable subsidies that improve financial results. At times these projects can be lucrative. On the whole, stocks like Brookfield Renewable Corporation are very intriguing.
