In this article, we will shed light on the 10 Best Hydrogen and Fuel Cell Stocks to Buy.
Global Warming Driving the Hydrogen Market
As of 2024, climate change has become an increasingly significant issue globally, as June in 2024 was the warmest month in the 175 year old history of NOAA National Centers for Environmental Information’s data record. Since carbon emissions is one of the driving factors for such a massive global impact, hydrogen, one of the biggest green & clean energy sources, is expected to see an upward trajectory in its market growth in the coming years. As such, its production and consumption are on the rise.
Therefore, the global hydrogen generation market, which stood at the $148 billion mark in 2023, is on its way to hitting $259 billion by 2033, growing at CAGR of 5.75%. Furthermore, BloombergNEF expects the hydrogen supply to grow thirty-fold to 16.4 million metric tons per year by 2030; however, they expect 30% of this planned supply to be achieved by 2030 mainly because of longer project timelines and unstable policy support. This supply is driven by the demand coming from electrolysis, which makes up most of the demand; also, blue hydrogen is pushing up the demand for hydrogen.
In terms of the countries’ share of this global supply, the U.S. is expected to account for 36% of this forecasted supply by 2030, thanks to the fact that most mature projects exist in the country, along with favorable tax policies. Moreover, China, Europe, and the U.S. would all together account for most of this supply by 2030 – 80% of the global supply to be exact. Moreover, the U.S also delivers over half of the world’s fuel cell vehicles, and is responsible for the production of 25,000 fuel cell material handling vehicles, over 8,000 small-scale fuel systems in the country, and over 550 MW of large-scale fuel cell power under planning or already installed, according to The Fuel Cell and Hydrogen Energy Association (FCHEA).
China Leading the Game of Hydrogen
On the other hand, China is leading in the game of electrolysis projects, meant for the production of hydrogen, as it owns 40% of these projects that have reached their Final Investment Decision (FID) globally. Kuqa electrolyzer in Xinjiang, which reached its completion in late June 2024, is the largest electrolysis project in the world, with a capacity to produce 200,000 tons of hydrogen per annum, on the back of the 250-megawatt electrolyzer powered by solar energy.
Germany Coming into the Play
Whereas, on the European front, Germany is leaping forward in the electrolysis market, as its government was seen to be confirming funding of two large hydrogen projects, worth $674 million. Similarly, The U.S. Department of Energy announced in March 2024 its plans to invest $750 million in the hydrogen projects, to bring down costs of clean hydrogen and up the advanced electrolysis technologies.
Therefore, with this analysis of the hydrogen market in the bag, it’s quite necessary to conduct an analysis of the best hydrogen and fuel cell stocks to buy right now, so that we can capitalize on this market growth in the coming time. Thus, let’s jump to our list of the 10 Best Hydrogen and Fuel Cell Stocks to Buy.
A generator being fueled and readied for use as part of an end-to-end green hydrogen ecosystem.
Methodology
To curate our list of 10 Best Hydrogen and Fuel Cell Stocks to Buy, we gathered a list of all companies with a significant presence in the hydrogen and fuel cell industry. We then further narrowed down on the basis of their upside potential and ranked the finest remaining companies by their number of hedge fund holders as of Q1, 2024, using Insider Monkey’s database that tracks the activity of 920 hedge funds. For stocks with equal number of hedge fund holders, we used their upside as the tiebreaker. With this let’s now jump to our list of the 10 Best Hydrogen and Fuel Cell Stocks to Buy.
Why are we interested in the stocks that hedge funds pile into? 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).
10. Bloom Energy Corporation (NYSE:BE)
Number of Hedge Fund Holders: 19
Bloom Energy Corporation (NYSE:BE) is based in California in the U.S. and is engaged in the making of solid oxide fuel cells; although they function much like batteries, last longer than them. These cells can rely on several fuels like natural gas, biogas, or hydrogen. These cells are then packaged in big containers which are then placed at the industrial or commercial site.
Bloom Energy Corporation (NYSE:BE) registered a massive loss in 2023 wherein it recorded an operating loss of $209 million, translating to a loss of $1.42 per share, including the non-operating expenses. The company has been experiencing losses continuously on an annual basis due to the fact that it’s in the early stages of commercialization and is looking for investors, amidst the constantly evolving energy market and extended sales cycles.
Analysts now predict that the company will break even soon and become profitable in 2025, with an expected profit of $26 million. To achieve this, the company would need to grow by 78% year-over-year. Whether it can achieve the breakeven soon or not, it’s a question that the investors must be wary of. While the growth trajectory required to breakeven is high, the company isn’t stopping making big leaps either.
It was announced by the company in April 2024 that it will be powering Quanta Computer’s operations through its fuel cell technology that will allow it to keep giving out the power to Quanta 24/7 365 days a year!
In July 2024, the company entered into a deal with CoreWeave, which is an AI company backed by Nvidia. According to the deal, Bloom Energy Corporation will be powering CoreWeave’s data center in Illinois. With the power demand set to grow from AI, and with this big deal in the bag already, Bloom Energy Corporation is anticipating a massive uptick waiting in the corner for them. Moreover, as a result of this deal, the stock surged 1.3% on the 17th of July.
Amidst these and many other developments, on May 22, the company also proposed a green convertible senior note offering, proceeds of which it intends to use to partially fund its R&D works, and sales & marketing activities, and capital expenditure.
With companies and authorities demanding cleaner low-carbon power solutions, and with AI-driven growth in data centers driving the demand for such power solutions even more, Bloom Energy’s management is expecting these shifts to work in favor of the company’s cheap low-carbon fuel cell technology. As such, analysts are seeing the company’s EPS increasing from negative $1.42 in 2023 to positive $0.11 in 2024, while they are expecting it to increase further, reaching $0.5 in 2025 on the back of a revenue increase of 24% in 2025.
Furthermore, the stock has grown around 9.4% in the past month as the analysts are giving out the buy rating of the stock. Moreover, 19 hedge fund holders have their stakes in the stock, totaling $84.6 million. Some big institutional investors are also keeping an interest in the stock, including Morgan Stanley, Vanguard, Blackrock, also justifying the stock’s place in our list of 10 Best Hydrogen and Fuel Cell Stocks to Buy.
Following is what the ex-CFO of the company spoke about the company’s profitability as of Q1 2024:
“I would expect an improvement in product margins as acceptances in the United States, the rest of our international business increase throughout the year. An area that improved our margins in the first quarter was our service business. As we continue to grow our revenues, reduce performance payments, and reduce our replacement power module costs. I would expect this trend to continue throughout the year, and we expect our service business to be profitable on a non-GAAP gross margin basis this year.”
9. Hyster-Yale, Inc. (NYSE:HY)
Number of Hedge Fund Holders: 20
Hyster-Yale, Inc. (NYSE:HY) is an American integrated company based in Ohio and specializes in designing lift trucks and materials handling solutions and services these through a robust network of independent dealers. To enhance their materials handling solutions and to provide an alternative source of energy for their lift trucks, they have in place their hydrogen fuel cell power products (fuel cell stacks and engines) which their subsidiary, Nuvera Fuel Cells, LLC makes.
Earlier this year, in January, Hyster-Yale, Inc. (NYSE:HY) announced that PortxGroup, a logistics handling company, will act as the distributor of the company’s products in key Asian sub-regions of Thailand, Malaysia, Indonesia, and South Korea, which would bolster the company’s business of materials handling in these regions’ seaports and terminals.
The company recorded an outstanding performance in Q1 2024, wherein, it recorded a revenue of $1.1 billion up by almost 10% to Q1 2023; this is the fourth consecutive quarter that the quarterly revenue has been over the $1 billion mark. Not only did their operating margin increase from 4.3% in Q1 2023 to 7.9% in Q1 2024 (the highest margin ever recorded), but their earnings per share also increased by almost 90% to $2.93 per share! This performance came out on the back of higher average sales prices and an optimal sales mix which resulted in improved margins; average lift truck sales price increase by 17% on a YoY basis.
The company has had an outstanding year in 2023, wherein its Q4 2023 operating profit was up by 146% from Q4 2022, reaching $48.7 million. The full-year net income was up by $200 million, while the revenue was up by 16%.
This continued operational excellence – on the back of product price increases, efficient product mix shifts, and improved product margins – has also led to a surge in the stock, which has increased 58% in the past year, and increased by 20.3% on a year-to-date basis!
Moreover, in May 2024, the company announced a new dealership with LiftOne – which runs a dealership of full-service materials handling and warehouse solutions. LiftOne would cover the regions of North Carolina, South Carolina, Alabama, Georgia, Tennessee, and Virginia in the U.S. for the servicing of the company’s products. This coverage would become effective from the 1st of June 2024. This showcases the company’s commitment to continuous expansion of its coverage to grow continuously.
The stock is priced fairly cheaply currently, and as the analysts are seeing the stock’s intrinsic value sitting somewhere around $96, the stock is carrying an upside of a cool 28%. While this forecast is on the upside, the average price target set by the analysts is also close – sitting at a stock price of $88.5 and carrying an upside of 18.7%. However, the stock carries high risk, as per analysts, which is also evident through the stock’s beta of 1.3; what this means is that the analysts, despite their forecasts, eye a negative earning growth of -5.6% on the downside, which anyone who’s investing in the stock should be wary of.
On the back of strong performance in the first quarter of 2023, and the expansion plans it’s carrying out, the analysts expect the company’s EPS to grow at 18.65% this year. As a result of this, 20 hedge fund holders have kept interest in the stock, worth $100.6 million. GAMCO Investors and AQR Capital Management have the largest holdings in the stock, worth $63 million and $4.9 million, respectively. Hence, the stock is well deservedly placed in our list of 10 Best Hydrogen and Fuel Cell Stocks to Buy.
8. Cummins Inc. (NYSE:)
Number of Hedge Fund Holders: 32
Cummins Inc. (NYSE:CMI), an American company, makes diesel and natural gas engines, hybrid and electric powertrains, and related components, while also taking charge of distribution and servicing activities. It has 5 segments: Engine, Distribution, Components, Power Systems, and Accelera. Through its Accelera segment, it operates in the hydrogen market, by producing hydrogen for power purposes. Cummins Inc. (NYSE:CMI) is ranked among the largest automotive companies and suppliers in the world.
The company has seen its demand stay strong for its products in the current year which has led the company to an impressive performance in the first quarter of 2024. The company saw its EBITDA increase from $1.4 billion in the period a year ago to $2.6 billion in the 1st quarter. This was primarily due to growth in the North American power generation segment which experienced a cool 21% increase in revenue for the period, the demand most driven by data centers. This quarterly performance follows an impressive yearly performance in 2023, wherein the company recorded revenue of $34.1 billion, which was up by 21% from the previous year on the back of soaring revenue from the North American segment (22% increase in revenue) and international market performance (20% increase in revenue).
On May 24, 2024, Accelera™ by Cummins unveiled updated models of its hydrogen fuel cell engines for commercial vehicles at the Advanced Clean Transportation (ACT) Expo in Las Vegas, driving its name in the decarbonizing technologies market. Furthermore, in June 2024, Accelera entered into a joint venture, “Amplify Cell Technologies”, with Daimler Trucks and PACCAR. This joint venture targets the electric commercial vehicles market by providing battery cells. Using this joint venture, the 21-gigawatt hour (GWh) factory is set to be constructed soon, details of which haven’t been disclosed yet.
The company has also increased its quarterly dividend from $1.68 to $1.82 per share, which is next going to be paid in September this year. The company has consecutively increased the dividend for the past 15 years, which means the stock also holds a lot for investors looking for dividend-paying stocks.
As such, the stock has been flowing positively in the investor’s eyes as well, as the stock price soared by 19.43% on a YTD basis. Furthermore, the analysts are seeing the stock going as high as $321 in the next twelve months, as compared to its current price of $286, as of writing this article; that means an upside of 12.2%. The analysts are also thinking quite highly about the earnings of the company in the current year, as they see it soaring high to $18.92 in 2024 from last year’s EPS of $5.2; the company’s earnings per share for the first quarter of this year was recorded at impressive $5.1 per share.
However, the separation of its Atmus Filtration business resulted in a net gain of $1.3 billion in transaction costs and other expenses, and a $29 million increase in its restructuring expense. Atmus Filtration Technologies reported net sales of $400 million for the full year 2023, at the end of which it was separated from Cummins. Thus, the business impact of this divesture shall be brought under consideration by the investors as the company expects its aggregate revenue down by 2% to 5% this year due to this factor.
As of 1st quarter of 2024, 32 hedge fund holders hold interest in the stock, worth $1.5 billion, with Fisher Asset Management and First Eagle Investment Management investing the biggest chunk of it, worth $796.5 million and $588.9 million, respectively, helping the stock bag a place in our list of 10 Best Hydrogen and Fuel Cell Stocks to Buy.
7. BP p.l.c. (NYSE:BP)
Number of Hedge Fund Holders: 40
BP p.l.c. (NYSE:BP) is a global energy company, founded in 1908, with its headquarters in London, U.K. It’s a company engaged in the production of natural gas, while also focusing on wind power, hydrogen, and carbon capture. Along with this, the company also produces oil and is engaged in EV charging, retail fuel, and lubricants, which its subsidiary Castrol takes responsibility for.
BP p.l.c. (NYSE:BP) is engaged in several hydrogen initiatives across the globe. Major developments took place related to the company’s proposed blue hydrogen facility in Teesside, H2Teesside. In February 2024, the company announced that it would be teaming with BASF, an international chemical company, whose gas-treating technology BP would be using for capturing carbon dioxide that would be produced during the process of hydrogen production. This is a crucial development given that the project has its commercial operations planned in 2028. Moreover, this project is high in stakes as it would expectedly produce 1.2GW of hydrogen by 2030, fulfilling 10% of the UK’s hydrogen target of 10GW by the same time.
Additionally, it was reported on 16th July 2024 that the company has gotten the green signal from the Federal Ministry for Economic Affairs and Climate Action (BMWK) and the Lower-Saxony Government in relation to funding required by the company for its 100-megawatt (MW) green hydrogen project in Germany. The hydrogen that would be produced has the potential to bag industrial clients for the company in the future, especially steel and chemical companies.
The share price of the company has taken a dip in the past year, in line with the falling oil and gas prices. While natural gas prices have fallen 2.7% in the past year, WTI Crude oil has fallen 1.7%, and understandably, the commodities’ prices have their say in the share price of the stock.
Lower oil and gas realizations, outage in the Whiting refinery, and lower fuel margins led the company’s replacement cost (RC) profits to decrease by $0.3 billion in the first quarter of 2024 to $2.7 billion. Nevertheless, the overall profit of the company rose sharply from $0.4 billion in Q4 2023 to $2.3 billion, thanks to inventory holding gains and increased production of oil despite lower realizations. Despite that the company’s cash flow just hung over the $5 billion mark, which is the lowest level of cash flow since Q4 2020, the company showed its commitment to shareholders’ returns by deciding on a $1.75 billion share buyback plan and announcing a dividend of 7.27 cents per ordinary share.
Despite the cyclical nature of the industry the company is in, and despite the up and down of the stock in the past year, the analysts believe in the developments the company is making in the field of alternative energy solutions industry, especially the hydrogen market, which is the apparent future of energy sector. The analysts have set the target price of the stock at $42.36, which is an upside of 21% from its current price of $34.92. Moreover, 40 hedge fund investors hold interest in the stock, worth $2 billion, helping the stock take a spot in our list of 10 Best Hydrogen and Fuel Cell Stocks to Buy.
6. DuPont de Nemours, Inc. (NYSE:DD)
Number of Hedge Fund Holders: 42
DuPont de Nemours, Inc. (NYSE:DD) is a tech-based materials and solutions provider that is headquartered in Delaware, U.S. Its operations span across the U.S., Canada, MENA region, Europe, and Asia Pacific. The company operates through three segments: Electronics & Industrial, Water & Protection, and Corporate & Other. Within its Water & Protection, the company is engaged in water purification and separation for the production and utilization of hydrogen through which the company is striding towards contributing to the global transition to sustainable and clean energy.
In September 2023, the company came up with its first product that was meant for the production of green hydrogen – the DuPont™ AmberLite™ P2X110 Ion Exchange Resin. This resin’s purpose is to produce hydrogen from water and to make the chemical process in electrolyzers seamless.
The company generally maintained the performance of the previous quarter in the recently concluded 1st quarter of 2024. The company recorded net sales of $1.4 billion in the quarter as compared to $1.3 billion in the quarter a year ago, while the EBITDA margin stood at 27.4%, down by 50 basis points. The sales increase was a result of the acquisition of Spectrum the company made a year ago.
As per the full-year guidance for 2024, the company expects its net sales to go as high as $12.4 billion from $12.1 billion in 2023, operating EBITDA to go as high as $3.1 billion from $2.9 billion in 2023, and adjusted EPS to go as high as $3.75 per share from $3.5 in 2023. The company expects its water segment to flourish in the 2nd quarter on the back of higher demand. The demand for the segment was low in the first quarter, which led the segment’s EBITDA to fall by 14% to $295 million. Furthermore, the company is expecting its overall net sales to increase in the second quarter to $3.025 billion, and its EBITDA to increase from $682 million to $710 million in the second quarter. This company expects on the back of volume improvement in its segments and reduced destocking impacts in its water segment. Now whether the company can capitalize on these forecasts is a question that we shall be way about.
Nevertheless, 11 analysts are setting the stock price target at $89.3 from its current price of $80.2, which means they are seeing an upside of 11.3% in the next twelve months amidst the company’s optimistic guidance for the year and improved performance from its water segment. Moreover, 40 hedge fund holders have a stake in the stock, worth $2.1 billion. Thus, the stock makes it to our list of 10 Best Hydrogen and Fuel Cell Stocks to Buy.
5. Shell plc (NYSE:SHEL)
Number of Hedge Fund Holders: 50
Shell plc (NYSE:SHEL), headquartered in London, U.K., is a global energy and petrochemical company. Within its Renewables and Energy Solutions segment, the company produces and sells hydrogen as a part of its mix of energy production offerings, alongside its focus on wind, solar, and electric vehicle charging services.
By Q1 2024, the company’s CrossWind project, which is an offshore wind project in the Netherlands, and Madison Fields project, which is a solar energy project in the U.S., reached their commercial operation, taking the company’s renewable power generation capacity to operation from 2.5GW in Q4 2023 to 3.2GW in Q1 2024. On an overall basis, the company’s adjusted earnings increased by approximately 6% from $7.3 billion in the previous quarter to $7.7 billion, while the EBITDA increased by 14.6% to $18.7 billion! This occurred on the back of a $1.6 billion increase in adjusted earnings in the company’s Chemicals & Products segment, which saw an increase in both the refinery processing intake and chemical sales volume.
However, the company’s revenue in the quarter fell by 17% on a YoY basis to $72.5 billion, amidst fluctuations in the oil prices, which leaves doubts on the minds of investors; however, what’s relieving is that the company still managed to maintain a healthy cash position as its operating cash flows amounted to $13.3 billion in the quarter, and shareholders’ returns amounted to $5 billion through dividends and share repurchases.
Shell plc (NYSE:SHEL), in addition to its petrochemical operations, is making strides in the alternative energy sources market, specifically in the hydrogen market. In March 2024, the company announced two hydrogen initiatives. The first initiative is the Holland Hydrogen 1 (HH1) project in the Port of Rotterdam, Netherlands, which the company will be initiating with Worley, an engineering consultancy company. The project is about a 200 MW electrolyzer, getting the power from an offshore wind farm, and will in return, produce about 60,000 kg of hydrogen per day, which will help supply power to over 2,300 trucks and also help decarbonize Shell’s Energy & Chemicals Park in Rotterdam. The second initiative involves Shell partnering with Bloom Energy in pursuit of exploring decarbonization solutions, by making use of Bloom’s hydrogen electrolyzer technology. By working together, both aim to create large-scale solid oxide electrolyzer (SOEC) systems, which will be responsible for the production of hydrogen that will be utilized across Shell’s operations. Thus, these initiatives are footprints of Shell’s commitment to leaping in the hydrogen market that is expected to see a demand boom in the coming time.
Thus, with the company’s goal to decarbonize fully by 2050, along with the relevant initiatives taken by the company in the field of renewables, and with the company expecting a 50% surge in its LNG business demand by 2040, accompanied by robust operational performance despite fluctuating commodities prices, the stock is receiving optimistic response from the investors, as evident from the fact that the stock has risen approximately 14% in the past year, with further growth expected as the analysts have set the target price at $86 from its current price of $71.3, translating to an upside of a cool 20.6%. As such, four hedge fund holders have recently taken up a stake in the stock, taking the total tally to 40, worth $5.5 billion, leading the stock all the way to our list of 10 Best Hydrogen and Fuel Cell Stocks to Buy.
4. Air Products and Chemicals, Inc. (NYSE:APD)
Number of Hedge Fund Holders: 51
Air Products and Chemicals, Inc. (NYSE:APD), headquartered in Pennsylvania, the U.S., produces atmospheric gases, process gases, and specialty gases. Thus, it also produces hydrogen and makes equipment for air separation and purification, and liquid hydrogen storage and transport.
The stock has been experiencing a dip in the last year, falling 15%, amidst the slow recovery of China from the COVID pandemic and the stagnant economy of Europe – the markets the company depends on greatly. The financial performance of the company took a hit from the same factor in Q1 2024 as well, wherein the company lowered its full-year EPS guidance from $12.97 to $12.35. This was followed up by a downtick of 12% in the company’s revenue in Q2 2024. However wary this might make the investors, it’s a matter of time before the company will be back to rolling out revenues, as the company is taking essential steps to restructure its operational plans.
The company has recently sold off its liquefied natural gas process technology and equipment business to Honeywell in July 2024 through a $1.81 billion all-in-cash transaction, in the pursuit of a greater focus on cleaner energy transition through hydrogen business at a larger scale, targeting decarbonization at industrial level and in relation to the heavy-duty transportation industry.
Accordingly, Neom’s green hydrogen project, which is a joint venture of ACWA Power, Air Products, and NEOM, and has a proposed capacity to produce up to 600 tons per day of carbon-free hydrogen, is striding rapidly in 2024, after having received $8.4 billion funding last year. The operations are set to take place in 2026, with substantial progress going to take place in the project’s construction in 2024.
This development showcases the company’s greater focus on the hydrogen market and means exciting times are around the corner for the company. It’s under the radar of the analysts as they see the price of the stock jumping 12% from its current price of $256 to $286.9. As such, the tally of hedge fund holders of the stock has increased from 42 in Q4 2023 to 51 in Q1 2024, taking the aggregate investment to $830.4 million, explaining how the stock makes it to our list of 10 Best Hydrogen and Fuel Cell Stocks to Buy.
3. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 62
Chevron Corporation (NYSE:CVX) is engaged in the markets of oil and natural gas, fuels, lubricants, chemicals, and additives.
This stock is also one of the best dividend growth stocks to buy according to hedge funds, as it has continuously been giving out dividends for 40 years while recording a dividend growth of 5.4% in the last three years. The company’s payout ratio exceeds the industry mean of 45%, equaling an impressive 56%. The company has given a full year’s production guidance according to which it expects $80/BBL Brent in 2024 while expecting an increase in production of somewhere between 4% to 7%. However, the analysts see the company’s expectations quite conservatively as the supply cuts are expected and will drive the prices up. Moreover, the approval came from the shareholders of Hess Corporation regarding the acquisition of the company by Chevron for $53 billion, which would mean further expansion of Chevron in Guyana.
Capitalizing on its 29-MW solar facility in California’s San Joaquin Valley, the company announced in February 2024 that it’s also going to produce hydrogen from the facility, the production equaling 2.2 tons per day. Moreover, the company has also taken Accelera on board for the supply of a 5-MW electrolyzer system for the company’s hydrogen production facility in a California oil field which will fuel the company’s freight trucks onsite. The announcement was made in April 2024.
Thus, with favorable prices in the future and higher production, along with the company’s leap towards the hydrogen business, 15 analysts have set a price target of $ 184.33, as compared to the current stock price of $154; This is an impressive upside of 19.6%. Moreover, 62 hedge fund investors hold a stake in the stock, worth $23.3 billion, also meaning that the stock makes it to our list of 10 Best Hydrogen and Fuel Cell Stocks to Buy.
However, massive fluctuation in the oil and gas prices is one factor that investors must keep an eye out on, and on any impact that those price fluctuations could have on the stock.
2. Linde plc (NASDAQ:LIN)
Number of Hedge Fund Holders: 65
Linde plc (NASDAQ:LIN), a global industrial gas company, specializes in hydrogen solutions. With its operations spanning across the world, Linde offers gases including hydrogen, oxygen, nitrogen, and argon, and also offers hydrogen and other process plants, targeting industrial sectors like healthcare, energy, manufacturing, and electronics.
The company recorded a revenue of $8.1 billion, which is a decrease of 1% from last year’s same period, amidst lower sales volumes recorded because of below-par production in the quarter. Despite this, the operating profit shot up 6% in the quarter to $2.3 billion, resulting in an operating profit margin of 28.9, up by 200 basis points – which was a result of efficient price and cost management. EPS on the other hand jumped 10% to $3.75 per share on the back of a reduced share count which occurred due to $1 billion worth of share repurchases in the quarter, showcasing the company’s healthy free cash flow position.
For the year 2024, the company has given an EPS guidance expecting EPS to lie somewhere between $15.3 to $15.6 per share, which would translate to 8% to 10% growth from the previous year. This company expects on the back of a healthy backlog worth $5 billion and continued developments taking place.
In April 2024, the company announced the initiation of a second electrolyzer in Brazil next to the company’s air separation facility in São Paulo. The plant would become operational in 2025 and would be responsible for the supply of green hydrogen to glass-making company, Cebrace. Furthermore, the company is putting in money worth $150 million to build, own, and operate an air separation facility in northern Sweden, through which it would help H2 Green Steel’s integrated plant reduce its carbon emissions by 95% through the supply of oxygen, nitrogen and argon. The plant is expected to be off and running in 2026.
As a result of its promising earnings growth trajectory, effective pricing, and robust productivity, the stock has grown 15% in the past year, and 8.3% from the year’s start. Looking forward, the analysts believe in the company’s continued growth and developments in the decarbonization initiatives, and are eyeing a target price of $470, which would translate to an upside potential of 6%. As such, hedge fund holders have invested their money worth $3.8 billion, with Scopus Asset Management investing the biggest chunk, worth $29 million. Thus, the stock bags a place in our list of 10 Best Hydrogen and Fuel Cell Stocks to Buy.
1. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 81
Along with its traditional energy operations of crude oil and natural gas, Exxon Mobil Corporation (NYSE:XOM) is also striding towards the hydrogen segment by engaging itself in hydrogen production, carbon capture, and lower-emission solutions.
Reported in July 2024, Jim Cramer included Exxon in the top companies expected to make it to the $1 trillion mark, on the back of its impressive consistent operational performance; Jim expects that to happen in the next two years, given that the oil prices jump at the same time, which the analysts are finding hard to predict.
The company has continued to perform well in Q1 2024 as it was seen recording an increase of $10 billion in free cash flow that exceeded analysts’ expectations by 21%, taking the total balance to $33 billion! Whereas the operating cash flow equaled $14.7 billion in the quarter. This was a result of $94 billion worth of capital expenditure in the past five years giving out returns to shareholders in the form of increased free cash flows in the quarter. The company continues to allocate capital towards exploration expenditures as it set aside an amount of $5.8 billion in the quarter for the said purpose.
The stock acts as a haven for investors as it not only paid back $6.8 billion worth of returns through dividends and share repurchase, but it also keeps its debt level at $40 billion which is quite healthy with respect to its free cash flow balance of $33 billion. Given the robust cash position and strong operational performances in the past some time now, the stock is an attractive one given its priced quite attractively as well at $12.52. More so, the company has been paying dividends for the past 142 years, with the quarterly dividend being $0.95 per share, yielding 3.3%.
In addition to this, the company finalized a project framework agreement with JERA, a Japanese power generation company, to explore ventures of low-carbon hydrogen and ammonia production in the U.S. Moreover, the two would now work together over the low-carbon hydrogen production plant in Baytown Complex, which Exxon is currently developing; this plant is expected to give out an annual production of 900,000 tons of low-carbon hydrogen and one million tons of low-carbon ammonia.
As such, the stock is expected to keep going on its upward trajectory (rose 14% on a YTD basis) as the analysts expect it to grow 17% in the next twelve months. Moreover, 81 hedge fund investors have held on to the stock, with the total investment being $5.5 billion. This comes on the back of the company’s earning guidance till 2027 according to which the company’s earnings potential is expected to increase by $10 billion till 2027, which is an annual growth rate of 10%. The company aims to do this through its projected cost savings, worth $15 billion, and its constant pricing and margins. Thus, the stock is well placed in our list of 10 Best Hydrogen and Fuel Cell Stocks to Buy.
While we acknowledge the potential of Exxon Mobil Corporation 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 Exxon Mobil Corporation but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and 10 Best of Breed Stocks to Buy For The Third Quarter of 2024 According to Bank of America.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
