Energy Sector Caution: 3 Natural Gas Stocks Not Worth Holding

Stocks to sell

Investor views on the gas market could be better with demand slowing and prices decreasing. The market’s sentiment may continue to linger on the bearish side.

The commodity has already accumulated a loss of 17.5% in November. It aligns with the outlook on some companies that operate in the same business due to their close relationship with commodity prices.

While lots of variables could affect these stocks, they take collateral damage when drastic changes in prices or global uncertainties arise. Investors should weigh their holdings, looking closely at exposure to the sector. Let’s examine these three that should top the list of natural gas stocks to sell.

Spire Inc. (SR)

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Spire Inc. (NYSE:SR) is a holding company that operates in the gas, gas utilities, and gas-related businesses. The company’s operations include the purchase, retail distribution, sale, and marketing of natural gas in Missouri, Alabama, and Mississippi.

Spire Inc. has been in a downtrend since the start of the year. And with a down fourth quarter, price recovery signs aren’t evident yet. The company appointed new president and CEO Steve Lindsey to succeed Suzanne Sitherwood, who will retire late December.

SR’s most recent financial results indicate that net income is starting to slow. So, its fiscal 2023 results showcase a slight decrease in that area year over year (YOY). Also, the company EPS missed earnings estimates by 18.18%, which is lower than the last quarter.

In addition, Spire Inc.’s seasonal nature could drive the stock prices even lower. Specifically, SR has higher interest expenses and corporate costs that can lead to further losses. Investors holding on to the stock might want to consider selling soon. 

Northwest Natural Holding Company (NWN)

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Northwest Natural Holding Company (NYSE:NWN) is a holding company that provides natural gas service distribution via its subsidiaries. These are spread to commercial, residential, and industrial clients in southwest Washington and Oregon.

Besides natural gas distributions, the company operates in the sectors of water and wastewater, renewable natural gas, and gas storage. NWN previously changed its management by promoting Justin B. Palfreyman to company president, who will oversee core operations and steer its future course.

NWN’s latest financials paint a picture of a difficult financial position. It posted a higher net loss YOY, even with an increased year to date (YTD) net income. It showed elevated operating expenses, declining profits, and interest costs that absorb profitability.

In addition, the report indicates its natural gas utility and NWN Natural Water and Renewables had their overall earnings impacted by these declining profits. Considering these inconsistencies in financial performance and the struggle to sustain profitability, investors should sell immediately.

UGI Corporation (UGI)

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UGI Corporation (NYSE:UGI) is a holding company that operates through its subsidiaries’ distribution, storage, and transportation of energy products.

The company’s operations include the sale of propane and related supplies and equipment in 50 states. Also, they distribute liquified petroleum gas (LPG) in European retail markets, and market gas products in the U.K., Belgium, and France. Additionally, UGI Corporation offers renewable natural gas (RNG) production, natural gas, and electricity in the Mid-Atlantic U.S. as part of its midstream and marketing business.

In UGI’s latest financial report, the company highlighted record earnings and strategic accomplishments as well as their investments in renewable energy. However, the company’s fiscal year 2023 showed a substantial GAAP net loss of $1.5 billion, a far cry from its adjusted net income of $1.07 billion YOY.

Also, UGI reported a loss in GAAP diluted earnings per share of -$7.16. And, the company’s guidance for fiscal 2024 remains cautious due to the hit in its profitability. This is a pressing concern as UGI’s success is closely linked to commodity prices. Should gas prices go lower, investors can expect further potential losses.

As of the date of publication, Rick Orford did not have any positions (either directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Rick Orford is a Wall Street Journal best-selling author, investor, influencer, and mentor. His work has appeared in the most authoritative publications, including Good Morning America, Washington Post, Yahoo Finance, MSN, Business Insider, NBC, FOX, CBS, and ABC News.

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