wall street analysts issued a slew of notes on the energy sector tuesday morning as many companies in the oil and gas industry are slated to release secondquarter earnings in the coming weeks in this piece were going to provide a quick overview on what the analysts at morgan stanley mizuho securities piper sandler and bank of america had to say tuesday and provide club members with updated thinking on our energy stocks pioneer natural resources pxd devon energy dvn halliburton hal chevron cvx and coterra energy ctra big picture its important to look at the specifics of what analysts wrote there is understandably a lot of nuance within the commentary as wall street tries to wrap its collective hands around the s  p 500 energy sector which soared to start the year but is now down over 22 from its june 8 peak at mizuho for example analysts lowered their price targets by roughly 8 on average for the stocks in their coverage universe but maintained buy ratings on many of those names including four we own pxd dvn ctra and cvx we continue to view global oil markets as structurally undersupplied and global natural gas even more so the mizuho analysts wrote while adding that inflationary pressures and supply chain issues are pushing up costs for companies even so they continued were frustrated to have missed the june peak but from here view riskreward for the group skewed heavily to the upside especially over a twelveplus month time horizon morgan stanley also warned about rising costs despite its expectations that companies will stick to plans for little or no production growth while returning large chunks of their excess cash flow to shareholders heading into 2q earnings we see risk of further budget increases and are generally above consensus on fullyear spend especially for those that did not raise guidance alongside 1q results morgan stanley analysts wrote noting their 2022 capital expenditure estimates for club name coterra energy are 9 above wall streets estimates they have an equal weight rating on ctra shares despite those cost concerns morgan stanley has secondquarter cash flow per share estimates above the street consensus amid continued volatility we see 2q earnings as a positive catalyst for the sector and expect another quarter of record fcf to support a further acceleration of cash returns they wrote with oil prices holding roughly 100 per barrel we expect inflationary pressures to persist though not derail the industrys fcf story over at bank of america analysts downgraded club stock pioneer natural resources to underperform from neutral the analysts cited underappreciated headwinds to free cash flow as pioneer becomes a full taxpayer again in the coming quarters once the companys net operating loss nol deductions run out at the same time bofa analysts arent negative on the entire sector they continue to rate chevron a buy and on tuesday upgraded a few energy stocks we dont own too including eog resources eog and conocophillips cop going forward the analysts expect the next leg of energy sector performance to be heavily bifurcated with differentiation nuanced by three issues specifically 1 inflationary pressures that squeeze breakeven oil prices 2 natural gas leverage and 3 impact of cash taxes on usbased exploration and production firms the clubs take jim cramers charitable trust which is the portfolio we use for the club has added to its energy exposure significantly this year there is basically a twopronged reason for that which remains intact even as the sector has gone through weakness in recent weeks and after we read through tuesdays analyst note drops the first part is about using energy stocks as an inflation hedge we use a longonly investment strategy so unlike a hedge fund we arent shorting any stocks or buying put options to build downside protection for our portfolio cash traditionally speaking has been our only hedge this year however energy stocks offer protection for our portfolio since many of the factors weighing on the rest of our portfolio the federal reserves monetary tightening to tamp down inflation and the russiaukraine war are related in some way to surging oil and gas prices our base case is that supplyanddemand mismatches lead oil prices to stay higher for longer meaning the fed may have to keep raising interest rates to slow the pace of inflation and possibly the us economy overall in that scenario our energy stocks should hold up relatively well compared to ratesensitive stocks we own for their longterm potential such as semiconductor firms nvidia nvda and advanced micro devices amd the other main part of our energy thesis is about the aggressive capital return strategies companies across the oil patch are deploying we are especially talking here about pioneer natural resources devon energy and coterra energy all three companies have adopted a disciplined approach to drilling and a baseplusvariabledividend strategy that returns large chunks of their excess free cash flow to shareholders in very simple terms the higher the price of oil the more cash companies have to pay dividends and repurchase stock however as we wrote earlier this month  our energy companies have oil breakevens significantly below where crude is currently trading just north of 100 per barrel this means that even if oil traded in the low 90s or high 80s for a meaningful stretch our energy firms would still be able to return capital to shareholders if things happen that cause oil prices to fall significantly below that range it would likely mean our energy stocks would trade lower and diminished capital returns while also providing a lift to other parts of our portfolio that benefit from tamed inflation and a more accommodative fed thats the hedge strategy we discussed above as of now we continue to believe in our bullish thesis which explains why we bought 15 shares of pioneer natural resources last week after the stocks recent declines  of our five energy stocks we have 1 ratings on four of them meaning wed be buyers here  chevron is rated a 2 meaning wed wait for a pullback before adding to our holdings jim cramers charitable trust is long pxd dvn cvx hal and ctra  see here for a full list of the stocks as a subscriber to the cnbc investing club with jim cramer you will receive a trade alert before jim makes a trade jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trusts portfolio if jim has talked about a stock on cnbc tv he waits 72 hours after issuing the trade alert before executing the trade the above investing club information is subject to our terms and conditions and privacy policy  together with our disclaimer  no fiduciary obligation or duty exists or is created by virtue of your receipt of any information provided in connection with the investing club no specific outcome or profit is guaranteed