Brokers Suggest Investing in Archrock Inc. (AROC): Read This Before Placing a Bet

Holding spots on the Zacks Rank #1 (Strong Buy) list, Archrock AROC and Monday.com MNDY are two stocks to consider after reporting their Q3 results on Monday.

As intriguing prospects among the energy and tech sectors, respectively, let’s review Archrock and Monday.com’s Q3 results to see why now is a good time to buy.

Archrock’s Natural Gas Services

Archrock’s expansion has become appealing among the Zacks Oil and Gas-Field Services Industry which is in the top 32% out of 250 Zacks industries.

Providing natural gas contract compression services, Archrock reached its Q3 earnings expectations of $0.28 a share. This was a pleasant increase from EPS of $0.20 in the prior-year quarter. On the top line, Q3 sales of $292.16 million rose 15% year over year despite slightly missing estimates of $292.95 million.

AROC has soared over +50% year to date but still trades under $25 and at a reasonable 22.1X forward earnings multiple. Archrock’s impressive YTD performance could continue as fiscal 2024 and FY25 EPS estimates have risen 6% and 9% in the last 30 days respectively.

Annual earnings are now projected to soar 59% this year and are slated to expand another 37% in FY25 to $1.50 per share. Reassuringly, total sales are projected to increase by over 15% in FY24 and FY25 with projections edging north of $1 billion.

Monday.com’s Software Applications

Allowing organizations to build software applications and work management tools, Monday.com has thrust itself into the conversation of up-and-coming tech stocks to consider.

Even better, Monday.com’s Zacks Internet-Software Industry is in the top 18% of all Zacks industries. Indicative of such, Monday.com was able to post Q3 EPS of $0.85 which crushed the Zacks Consensus of $0.61 by 39% and soared from $0.64 a share in the prior period. Q3 sales of $251 million beat estimates of $245.67 million and spiked 32% from $189.19 million a year ago.

Also benefitting from a positive trend of earnings estimate revisions, Monday.com's increased profability is being fueled by expectations of high double-digit top line growth in FY24 and FY25 .

Like Archrock, Monday.com’s annual sales are edging toward $1 billion with the company’s future earnings potential starting to compel investors.

To that point, MNDY is sitting on +40% gains in 2024 and has skyrocketed over +150% in the last two years. Seeing nice momentum, Monday.com has been one the best-performing IPOs in recent years with its stock up +50% since going public in June of 2021.

Bottom Line

As two top-performing stocks this year, Archrock and Monday.com are certainly worthy of consideration after posting impressive quarterly growth. With their earnings estimate revisions remaining higher, the rally in AROC and MNDY may continue.

Zacks Investment Research

Exxon Mobil Corporation XOM, the U.S.-based oil and gas giant, has entered into an agreement to sell its older assets located in the Permian Basin of Texas and New Mexico. The company has not disclosed the buyer of the assets or the deal’s valuation. However, according to sources, the assets have been sold to a privately held energy company, Hilcorp Energy, for approximately $1 billion.

XOM Sells Permian Basin Assets to Hilcorp Energy

Per Reuters, ExxonMobil had previously auctioned these assets to shift its focus on shale drilling properties which offer higher growth and better returns. Hilcorp Energy emerged as the winner of the auction, buying these assets for approximately $1 billion. ExxonMobil stated that the transaction will likely be closed in the March quarter of 2025.

XOM's divestment involves conventional oil drilling assets in the Permian Basin. The company mentioned that these assets include conventional vertical wells, not horizontal ones. Vertical wells are typically less advanced than horizontal wells used in shale production.

XOM Maintains Focus on High-Growth Shale Properties

The company stated that the divestment aligns with its strategy to focus on investments that improve its portfolio by adding advantaged assets. ExxonMobil also mentioned that it has been continuously optimizing its portfolio to focus on its most profitable assets. The company follows a strategy of divesting its non-core assets and using the proceeds to strengthen its balance sheet.

Hilcorp Energy Expands Portfolio

The company specializes in buying older, mature assets from rival companies in the industry and is one of the most active buyers of such assets. Previously, the private firm acquired Eni’s assets offshore Alaska in a deal worth $1 billion. The U.S. oil and gas sector has recently witnessed a consolidation trend within the industry. Taking advantage of the favorable commodity price environment, many oil and gas majors have pursued large mergers, such as the $60 billion acquisition of Pioneer Natural Resources by ExxonMobil and the pending $53 billion all-stock merger between Hess and Chevron Corporation.

XOM’s Zacks Rank and Key Picks

Currently, XOM carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the energy sector are Archrock Inc. AROC, Smart Sand, Inc. SND and FuelCell Energy FCEL. Archrock presently sports a Zacks Rank #1 (Strong Buy), while Smart Sand and FuelCell Energy carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Archrock is an energy infrastructure company based in the United States, with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.

Smart Sand is a low-cost producer of high-quality Northern White frac sand, an ideal proppant for hydraulic fracturing and various industrial applications. The company provides proppant and other logistics services for several companies in the oil and gas industry. With sustained demand in the oil and gas market, SND is expected to see growing demand for its services, reflecting a positive outlook.

FuelCell Energy is a clean energy company offering low-carbon energy solutions. It produces power using flexible fuel sources such as biogas, natural gas and hydrogen. The company designs fuel cells that generate electricity through an electrochemical process that combines fuel with air, reducing carbon emissions and minimizing the environmental impact of power generation. As such, FCEL is anticipated to play a crucial role in the energy transition by enabling industries and communities to shift from traditional fossil fuels to low-carbon alternatives.

Zacks Investment Research

BP plc’s BP current efforts to scale back on its renewable projects' expansion shall not affect the offshore wind projects that the British energy major has undertaken with the German energy company EnBW, as per Reuters. In recent months, BP has been maintaining its focus on its high-margin business while scaling down the aggressive expansion of its renewables unit. The company had previously announced that it plans to sell off its U.S. onshore wind business and divest a small stake in its offshore wind business.

Overview of the Partnership

However, per EnBW, these decisions are not likely to affect BP’s partnership with the German energy firm. BP and EnBW forged a 50-50 partnership in 2021 to develop offshore wind projects in the UK. The companies have signed lease agreements for two 60-year leases that should enable them to develop offshore wind projects in the Irish Sea. Furthermore, they have signed an option agreement related to a lease in the UK North Sea.

The three projects, named Morven, Morgan and Mona, have the collective capacity to generate up to 5.9 gigawatts (GW) of power, enough to meet the needs of approximately 6 million households in the UK.

BP’s Scale-Back Unlikely to Affect JV’s Operations

EnBW mentioned that BP’s strategy to scale down its renewables business is global. The decision does not affect the JV’s plans. EnBW further mentioned that the JV is advancing with its projects, and the operations remain unaffected by BP’s decision to cut back on further investments in renewables.

BP’s Zacks Rank and Key Picks

Currently, BP carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the energy sector are Archrock Inc. AROC, Smart Sand, Inc. SND and FuelCell Energy FCEL. Archrock presently sports a Zacks Rank #1 (Strong Buy) each, while Smart Sand and FuelCell Energy carries a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Archrock is an energy infrastructure company based in the United States, with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.

Smart Sand, Inc. is a low-cost producer of high-quality Northern White frac sand, an ideal proppant for hydraulic fracturing and various industrial applications. The company provides proppant and other logistics services for several companies in the oil and gas industry. With sustained demand in the oil and gas market, SND is expected to see growing demand for its services, reflecting a positive outlook.

FuelCell Energy is a clean energy company offering low-carbon energy solutions. It produces power using flexible fuel sources such as biogas, natural gas and hydrogen. The company designs fuel cells that generate electricity through an electrochemical process that combines fuel with air, reducing carbon emissions and minimizing the environmental impact of power generation. As such, FCEL is anticipated to play a crucial role in the energy transition by enabling industries and communities to shift from traditional fossil fuels to low-carbon alternatives.

Zacks Investment Research