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BP: Analysts’ Ratings before Its 1Q18 Earnings

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Apr. 27 2018, Updated 10:31 a.m. ET

Analysts’ ratings

In this series, we have examined BP’s 1Q18 estimates, segmental outlook, stock returns, moving average trend, and stock price estimate range prior to its earnings release on May 1. In this part, we’ll look at analysts’ ratings for BP.

BP has been rated by 12 Wall Street analysts. Five (or 42%) analysts assigned “buy” or “strong buy” ratings, six (or 50%) analysts assigned “hold” ratings, and one (or 8%) analyst assigned a “sell” rating on the stock. BP’s mean target price of $45 per share implies a 4% gain from the current level.

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Mixed opinions on BP

BP has a strong strategy in place, which includes cutting costs, optimizing the capex, and selling non-competitive assets. BP plans to balance its organic cash flow at the oil price point of $50 per barrel in 2018. BP plans to keep the capex between $15 billion to $16 billion in 2018. The company also plans to divest non-competitive assets to the tune of $2 billion–$3 billion in 2018. BP plans to limit its oil spill charges to just over $3 billion in 2018.

With a clear strategy in place, BP’s financial position could improve. Also, BP has started eight critical upstream projects per schedule in 2017–2018, which add to the company’s overall hydrocarbon production. Analysts who weigh high on BP’s improving financials and expected earnings growth have probably assigned “buy” ratings on the stock.

However, BP continues to have high debt on its balance sheet. The company’s total debt-to-total capital ratio is higher than ExxonMobil (XOM), Chevron (CVX), and Royal Dutch Shell (RDS.A). Higher debt is presumably why many analysts assign “hold” or “sell” ratings.

Analysts’ ratings for BP’s peers

Royal Dutch Shell, Chevron, and ExxonMobil have been rated as a “buy” by 91%, 78%, and 33% of the analysts, respectively. Suncor Energy (SU), Total (TOT), and YPF (YPF) have been rated as a “buy” by 93%, 33%, and 92% of the analysts, respectively.

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