Will 1Q18 Earnings Affect Analyst Ratings for BP?



Analyst ratings for BP

In the earlier parts of this series, we examined BP’s (BP) segmental earnings in 1Q18. We also discussed BP’s stock performance after its earnings release on May 1. In this part, we’ll consider analyst ratings for BP after 1Q18 earnings.

BP is currently rated by a total of 12 analysts. Of the total, six analysts have given it “buy” or “strong buy” ratings, five have assigned it “hold” ratings, and one analyst has assigned it “sell” ratings. BP could witness a change in ratings in the upcoming days as analysts further analyze 1Q18 numbers. BP’s mean target price stands at $46 per share, implying a 3% gain from the current level.

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Will 1Q18 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 comprises 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 aims to reduce oil spill charges to just over $3 billion in 2018.

Thus, with a strong strategy in place, BP is witnessing improvement in its financial position. BP’s 1Q18 earnings, which rose steeply, attests to this. Also, the rise in BP’s operating cash flows in 1Q18 point towards the benefit of stricter measures taken by the company. Also, BP has started eight critical upstream projects according to schedule in 2017 and 2018, adding to the company’s overall hydrocarbon production. Thus, analyst ratings for BP could improve mainly backed by growing earnings and cash flows led by a framework of strict financial discipline.

Analyst ratings for peers

BP’s peers ExxonMobil (XOM), Royal Dutch Shell (RDS.A), and Chevron (CVX) have been rated as a “buy” by 35%, 91%, and 77% of analysts, respectively. Also, other global players like Statoil (STO), Petrobras (PBR), and YPF (YPF) have been rated as a “buy” by 20%, 67%, and 92% of analysts, respectively.

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


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