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Majority of Analysts Rate BP a ‘Hold’: Will That Improve?

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Majority of analysts rate BP a ‘hold’

BP is covered by 11 analysts. Of those, four (or 36.0%) have assigned BP a “buy” or “strong buy” rating. Seven (or 64.0%) have assigned it a “hold” rating, and none of them have assigned it a “sell” or “strong sell” rating. BP’s mean target price of $38 per share implies an 8.0% rise from the current level.

BP’s peers ExxonMobil (XOM), Royal Dutch Shell (RDS.A), and Chevron (CVX) have been rated a “buy” by 19.0%, 91.0%, and 67.0% of analysts, respectively. Other global players such as Statoil (STO), Petrobras (PBR), and YPF (YPF) have been rated a “buy” by 60.0%, 50.0%, and 77.0% of analysts, respectively.

If you’re scanning stocks for exposure to large US companies, you can consider the SPDR Dow Jones Industrial Average ETF (DIA). It has a ~6.0% combined exposure to integrated energy majors XOM and CVX.

BP is focused on disciplined growth

BP plans to grow with the financial framework, which not only allows the company to take new strides but also provides it a sturdy base to face turbulent times. The company plans to lower capex (capital expenditures), cut costs, and divest non-core assets.

BP is restructuring its portfolio by divesting its non-strategic assets. It plans to divest $4.5 billion–$5.5 billion of its assets in 2017 to raise funds. The company’s divestment proceeds for 1Q17 were $0.30 billion. After 2017, BP expects $2.0 billion–$3.0 billion of asset sales per annum.

BP’s organic capex for 1Q17 was $3.5 billion. It expects its 2017 organic capex to be around $15.0 billion–$17.0 billion. Its 2016 organic capex was $16.0 billion. BP is aiming to lower its cost structure to aid its liquidity position.

BP’s strategy of cutting costs, selling non-strategic assets, and optimizing capex will likely work in its favor. Growth in production in the second half of 2017 due to new upstream project start-ups coupled with better oil prices will likely aid BP’s cash flow. So while the majority of analysts rate BP a “hold,” they might reconsider their ratings if they recognize the possibility of better cash flows in the second half of 2017.

In the next part, we’ll take a look at BP’s stock performance.

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