BP’s 4Q16 Earnings Miss Estimates: Stock Falls 4%



BP’s 4Q16 performance

BP (BP) reported its 4Q16 earnings on February 7, 2017. Its revenues missed Wall Street analysts’ estimates by 7.0%.

BP reported diluted EPS (earnings per share) of $0.16 in 4Q16. After adjusting for special items, its adjusted EPS was $0.12 compared to an estimated EPS of $0.15, missing analysts’ estimates. BP’s 4Q16 adjusted EPS is almost double its 4Q15 adjusted EPS.

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BP’s 4Q16 earnings

BP reported earnings of $497.0 million in 4Q16. That translated to URC (underlying replacement cost) profits of $400.0 million compared to $196.0 million in 4Q15.

URC, a non-GAAP (generally accepted accounting principles) measure, is determined by making certain adjustments to a company’s reported profit or loss for a period. These adjustments include inventory holding gains or losses, net favorable or unfavorable impacts of non-operating items, and fair value accounting effects net of tax.

BP’s URC EBIT (earnings before interest and tax) also rose. That was due to a rise in upstream earnings. BP’s upstream segment swung to a profit in 4Q16 compared to a loss in 4Q15.

However, earnings for downstream and Rosneft (BP’s equity stake in the Russian oil company) fell YoY (year-over-year). We’ll take a look at BP’s segment-by-segment performance in the next part of this series.

Peer performances

BP’s peer Royal Dutch Shell (RDS.A) posted a 48.0% YoY fall in adjusted EPS in 4Q16. BP (BP) and Shell (RDS.A) (RDS.B) are part of the FTSE 100 Index (UKX-INDEX), which is comprised of large UK companies. BP, RDS.A, and RDS.B have a ~15.0% weight in the index in terms of market capitalization. The index closed higher despite BP falling 4.0%. We’ll take a look at BP’s stock performance later in the series.

Chevron’s (CVX) 4Q16 adjusted EPS was 19.0% lower than its 4Q15 adjusted EPS. But ExxonMobil’s (XOM) 4Q16 adjusted EPS was 34.0% higher than its 4Q15 EPS.

If you’re looking for exposure to integrated energy stocks, you can consider the Vanguard Energy ETF (VDE). VDE has a ~39.0% exposure to integrated energy sector stocks.

Next, let’s see how changing oil prices have altered BP’s segmental dynamics.


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