A pool of energy service stocks are likely to rally through year end thanks to fatter profit margins leading to quarter-over-quarter earnings growth and higher price-to-earnings multiples, Goldman Sachs analysts said in a Tuesday note to clients. Service stocks as a whole have far outperformed the Energy Select Sector SPDR ETF this year, Goldman noted. The VanEck Oil Services ETF , for example, is up 30.3% over the past three months, three times the gain in the broader Energy Select ETF, according to FactSet data. OIH XLE 3M mountain Energy service ETF vs Energy ETF over past three months. Companies in a position to help themselves rather than rely on the commodity market to boost performance are likely to work best for investors, Goldman analysts led by Ati Modak wrote. “One of the key themes that we highlighted throughout 2023 is the importance of idiosyncratic self-help drivers. We believe there are a number of attractive buy rated stocks that can drive sequential growth, margin expansion and multiple expansion even in a range bound commodity environment with Brent near $80/bbl,” they said. Among Goldman’s stock picks in the sector: Weatherford — Profit margins and free cash flow can expand “from self-help initiatives.” Atlas Energy — The 42-mile-long Dune Express electric conveyor system “offers strong growth … even in a declining spot sand price environment.” Baker Hughes — Order backlogs are growing as a result of liquid natural gas and new energy commitments, while BKR is helping itself through “improved free cashflow conversion and better transparency.” SLB — Is benefiting from increased spending on oil and gas exploration and production in the Middle East. Other energy service stocks that Goldman also rates a buy are Halliburton , MasTec and Expro Group Holdings . — CNBC’s Michael Bloom contributed to this report.
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