Energy Business

SunTrust Has Contrarian Energy Calls for a Nervous and Expensive Market


This is actually a utility stock that delivers big dividends. PPL Corp. (NYSE: PPL) serves 321,000 natural gas and 397,000 electric customers in Louisville and 16 surrounding counties, and 543,000 customers in 77 Kentucky counties and five counties in Virginia. The company also provides electric delivery services to approximately 1.4 million customers in Pennsylvania and operates electricity distribution network for the Midlands, South West, and Wales in the United Kingdom.

In addition, the company offers a range of customer care and back-office services to competitive retail energy suppliers, including customer enrollments; contract management; electronic data exchange; simple and complex billing; and call center operations comprising telemarketing, payment processing and collections of overdue accounts.

PPL investors receive a generous 5.39% dividend. The $36 SunTrust price target is higher than the $32.17 consensus target. The stock closed trading Wednesday at $31.16 per share.

Ring Energy

The analysts at SunTrust have been positive on this a solid small-cap play for some time. Ring Energy Inc. (NYSE: REI) is engaged in oil and natural gas acquisition, exploration, development and production activities. Its exploration and production interests are focused on Texas and Kansas.

The company’s operations are all oil and gas exploration and production related activities in the United States. Its primary drilling operations target the Central Basin Platform in Andrews and Gaines counties and the Delaware Basin in Reeves and Culberson counties, all in Texas.

Ring Energy primarily sells its oil and natural gas production to end users, marketers and other purchasers. The company’s long-term business strategy is focused on the exploration, development and acquisition of oil and natural gas properties in the Permian and Mid-Continent regions of the United States.

SunTrust has set its price target at $12. The posted consensus figure was last seen at $9.14, and the stock closed Wednesday at $3.34 a share.

Targa Resources

This top energy master limited partnership has had a string of positives lately and makes sense for income investors. Targa Resources Corp (NYSE: TRGP) is a leading provider of midstream services and is one of the largest independent midstream energy companies in North America. Targa owns, operates, acquires and develops a diversified portfolio of complementary midstream energy assets.

The company is primarily engaged in the business of gathering, compressing, treating, processing and selling natural gas; storing, fractionating, treating, transporting and selling NGLs and related products, including services to liquefied petroleum gas exporters; gathering, storing and terminaling crude oil; storing, terminaling and selling refined petroleum products.

Targa Resources has one of the premier asset positions in the Permian basin. With solid management, a strong balance sheet and attractive exposure to some of the most attractive U.S. energy basins, it remains a top pick across Wall Street.

Investors receive a huge 9.46% distribution. The SunTrust price objective is $48. The consensus target is higher at $49.81, and the shares closed most recently at $36.97.

These are five very different contrarian picks in what many would consider a very contrarian sector. It is entirely possible, since oil pricing has slipped dramatically, that the OPEC members will continue to keep the current production cuts in place. In addition, the busy summer driving and travel season is right around the corner, and that could help generate increased demand as well.

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