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Will Analysts Raise Ratings for BP after 4Q17 Earnings?

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Feb. 9 2018, Updated 7:33 a.m. ET

Analyst ratings for BP

In this series so far, we have examined BP’s (BP) 4Q17 earnings versus estimates. Plus, we analyzed BP’s segmental earnings in 4Q17. We also discussed BP’s stock performance after its earnings release on February 6, 2018. In this part, we’ll consider the analyst ratings for BP after 4Q17 earnings.

Post-earnings, BP has been rated by a total of 11 analysts. Of the total, five analysts have assigned “buy” or “strong buy” ratings, five have assigned “hold” ratings, and one has assigned a “sell” rating on the stock. BP could witness a change in ratings in days to come as analysts analyze 4Q17 numbers more. BP’s mean target price stands at $44 per share, implying an 8% gain from the current level.

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Will 4Q17 earnings impact analyst ratings for BP?

BP plans to balance its organic cash flow at the oil price point of $50 per barrel in 2018. For this, BP has a robust strategy in place, which consists of cutting costs, optimizing capex, and selling non-competitive assets. Also, BP plans to lower the oil balance point steadily until 2021.

BP plans to spend $15 billion to $16 billion in capex in 2018. The company also plans to divest non-competitive assets to the tune of $2 billion to $3 billion in 2018. Plus, BP plans to limit its oil spill charges to just over $3 billion in 2018.

Going forward, from 2019 to 2021, BP plans its capex to be in the range of $15 billion to $17 billion. BP also foresees its divestment proceeds to be in the range of $2 billion to $3 billion. Plus, oil spill charges are expected to be just over $2 billion in 2019 and then fall to around $1 billion after that.

Thus, with a strong strategy in place, BP could witness improvement in its financial position. Also, BP started seven critical upstream projects on schedule in 2017, adding to the company’s overall hydrocarbon production. Thus, analyst ratings for BP could improve mainly backed by expected growth in earnings and cash flows led by a strict financial framework.

Analyst ratings for peers

BP’s peers ExxonMobil (XOM), Royal Dutch Shell (RDS.A), and Chevron (CVX) have been rated as a “buy” by 21%, 91%, and 65% of analysts, respectively. Also, other global players like Statoil (STO), Petrobras (PBR), and YPF (YPF) have been rated as “buy” by 20%, 39%, and 92% of analysts, respectively.

In the next part, we will look at the change in implied volatility in BP on its earnings release day. We’ll also estimate BP’s stock price range post-earnings.

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