Net-zero emissions goals are tailwinds for green stocks.
Green energy stocks provide investors with a huge long-term growth opportunity. The 2022 Inflation Reduction Act, or IRA, allocates $369 billion to invest in climate change solutions and technology. Bank of America recently reported that 75% of the companies the firm’s analysts cover aim to achieve net-zero carbon emissions by 2050. In fact, countries representing 91% of global gross domestic product also have net-zero emissions targets in place. However, as the past two years have demonstrated, not all green stocks are market winners. Here are eight of the best green stocks to buy, according to Bank of America.
NextEra Energy Inc. (ticker: NEE)
NextEra Energy is the holding company of utility Florida Power & Light and wind and solar electricity supplier NextEra Energy Resources. NextEra is also one of Bank of America’s top green stocks in the renewable energy category. Analyst Julien Dumoulin-Smith says NextEra offers investors one of the best earnings growth profiles in the entire utilities sector, and the Inflation Reduction Act should help extend that growth runway. Dumoulin-Smith says decarbonization presents a tremendous opportunity for capital-light earnings growth, and NextEra’s originations will accelerate in coming months. Bank of America has a “buy” rating and $94 price target for NEE stock, which closed at $82.67 on Jan. 23.
Linde PLC (LIN)
Linde is the world’s largest industrial gas company, selling atmospheric and process gases and designing and building industrial gas equipment. Linde is another of Bank of America’s top stock picks in the renewable energy category, but while NextEra focuses on solar energy, Linde is focused on hydrogen energy. Analyst Steve Byrne says clean energy will be a growth driver for Linde. In the near term, Byrne says demand for blue hydrogen, or hydrogen produced from natural gas mixed with hot steam as a catalyst, is the biggest opportunity. Bank of America has a “buy” rating and $361 price target for LIN stock, which closed at $326.49 on Jan. 23.
General Motors Co. (GM)
General Motors is the largest U.S. manufacturer of cars and trucks. One of the most popular investing themes on Wall Street in recent years has been electric vehicles. Unfortunately, many top EV stocks have struggled with profitability, high valuations and production disruptions. GM is planning to invest $35 billion in EVs by 2025 and transition to entirely EV production by 2035. Analyst John Murphy says top EV pick GM is managing its core business well while it invests in autonomous and electric vehicle technology. Bank of America has a “buy” rating and $80 price target for GM stock, which closed at $36.44 on Jan. 23.
Eaton Corp. PLC (ETN)
Eaton is a diversified industrial equipment and parts producer that makes electrical systems and components. Eaton is also a top Bank of America stock pick in the smart grid and storage energy efficiency category. Analyst Andrew Obin says Eaton’s strong project backlog, accelerating order growth and exposure to end markets with high demand have the company positioned to grow revenue in 2023 even in a mild recession. Obin says Eaton will be a direct beneficiary of the U.S. government’s focus on green energy and reshoring. Bank of America has a “buy” rating and $180 price target for ETN stock, which closed at $158.92 on Jan. 23.
James Hardie Industries PLC (JHX)
James Hardie Industries is a global building materials company that specializes in fiber cement products. It’s also one of Bank of America’s top stock picks in the energy efficient buildings category. James Hardie shares are down 38.2% in the past year, making it the worst-performing stock on this list. Analyst Shaurya Visen says his bullish outlook for James Hardie is driven by the company’s mix-shift toward the repair-and-remodel market, which now makes up about two-thirds of the company’s North American volumes. Bank of America has a “buy” rating and $39.60 price target for JHX stock, which closed at $21.07 on Jan. 23.
Hexcel Corp. (HXL)
Hexcel develops and manufactures advanced composite materials and other engineered products for industrial and commercial aerospace and defense applications. The company is one of Bank of America’s top stock picks in the industrial and integrated energy efficiency space. Analyst Ronald Epstein says Hexcel should experience significant free cash flow growth as the commercial aerospace market recovers. Hexcel has a $7 billion order backlog and high inventories that Epstein says will help it meet strong 2023 demand, and he projects 7.8% revenue growth this year. Bank of America has a “buy” rating and $70 price target for HXL stock, which closed at $61.35 on Jan. 23.
Howmet Aerospace Inc. (HWM)
Howmet Aerospace manufactures lightweight metal products, specializing in jet engine components, titanium structural parts, aerospace fastening systems and forged wheels. Howmet is one of Bank of America’s top stock picks in the auto energy efficiency category. Epstein says supply chain challenges will continue in 2023, but F-35 fighter jet demand puts Howmet’s commercial aerospace revenue on track to grow 20% this year. He projects overall 2023 revenue growth of at least 12% and expects Howmet to grow earnings by nearly 25% annually from 2021 through 2025. Bank of America has a “buy” rating and $45 price target for HWM stock, which closed at $39.43 on Jan. 23.
Credo Technology Group Holding Ltd. (CRDO)
Credo Technology provides energy and cost-efficient high-speed connectivity solutions, and it is one of Bank of America’s top stock picks in the information and communications technology energy efficiency category. Credo’s market capitalization is just $2.5 billion, but it has been a top market performer in the past year, gaining 56.7% from its $10 initial public offering price in January 2022. Analyst Vivek Arya says the key to Credo’s upside is its active electric cable business, which could account for half of the company’s long-term revenue. Bank of America has a “buy” rating and $18 price target for CRDO stock, which closed at $15.67 on Jan. 23.
8 best green stocks to buy in 2023:
— NextEra Energy Inc. (NEE)
— Linde PLC (LIN)
— General Motors Co. (GM)
— Eaton Corp. PLC (ETN)
— James Hardie Industries PLC (JHX)
— Hexcel Corp. (HXL)
— Howmet Aerospace Inc. (HWM)
— Credo Technology Group Holding Ltd. (CRDO)
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8 Best Green Stocks to Buy for 2023 originally appeared on usnews.com
Update 01/24/23: This story was published at an earlier date and has been updated with new information.
