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Inside BP’s 1Q17 Estimates: Weighing the Healthy Expectations

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BP’s 4Q16 results versus estimates

BP (BP) is expected to post its 1Q17 results on May 2, 2017. Before we proceed with the company’s 1Q17 estimates, let’s look at how BP performed in 4Q16.

In 4Q16, BP’s revenues missed the Wall Street analyst estimates by 7%, reporting diluted EPS (earnings per share) of $0.16. Upon adjusting for special items, however, BP’s adjusted EPS stood at $0.12, compared to the estimated EPS of $0.15, missing analyst estimates. BP’s 4Q16 adjusted EPS came in at almost double its 4Q15 adjusted EPS.

BP reported earnings of $497 million in 4Q16, which translated to URC (underlying replacement cost) profits of $400 million in 4Q16, as compared to $196 million in 4Q15. BP’s URC EBIT (earnings before interest and tax) also rose due to the rise in its upstream earnings.

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BP’s 1Q17 estimates

According to Wall Street analysts, BP is expected to post EPS of $0.40 in 1Q17—more than triple its 4Q16 adjusted EPS and more than double its 1Q16 EPS. BP’s revenues are estimated to be around $51.7 billion in 1Q17, which would be 34% higher than its 1Q16 revenues.

In 1Q17, average crude oil prices have climbed higher than in 1Q16. This rise could result in better upstream earnings, while downstream earnings are likely to be higher due to a YoY (year-over-year) rise in BP’s global refining marker margins in 1Q17 (see part 2).

Expectations from peers

By comparison, peers Royal Dutch Shell (RDS.A) and ExxonMobil (XOM) are expected to post 101% and 98% higher EPS in 1Q17, respectively, on a YoY basis. Chevron (CVX) and Suncor Energy (SU) are expected to see steep YoY surges in their earnings in 1Q17.

If you’re scanning stocks for indirect exposure to large US companies, you might consider ETFs like the SPDR Dow Jones Industrial Average ETF (DIA), which has ~6% of combined exposure to integrated energy majors XOM and CVX. If you are looking for exposure to core S&P 500 Index stocks, you can hold the SPDR S&P 500 ETF (SPY), which has ~7% exposure to the energy sector stocks, including XOM and CVX.

Continue to the next part for a discussion of BP’s 1Q17 earnings outlook.

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