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Analysts Expect BP Stock to Post 10% Gains

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BP’s implied gains

Wall Street analysts expect BP (BP) stock to post gains of ~10% in a year. Suncor Energy (SU), Total (TOT), and Royal Dutch Shell (RDS.A) have higher implied gains of 27%, 23%, and 22%, respectively.

BP’s implied gains have widened due to the steeper rise in its mean target price compared to its stock price. The stock has risen 2% in the past year. Analysts’ mean target price on BP stock has increased 9% during the same period to $48.9.

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Earnings estimate for 2019

Analysts expect BP’s earnings to fall 11% in 2019. The decline could be due to crude oil prices falling 40% in the fourth quarter. The decline caused many analysts to revise their oil estimates downward for 2019, which led to a fall in BP’s expected upstream earnings.

BP’s debt and liquidity positions weakened in 2018 due to the company’s growth activities through capex and acquisitions. BP’s total debt-to-total capital ratio of 39% was higher than its peers in 2018. ExxonMobil (XOM), Chevron (CVX), and Royal Dutch Shell’s (RDS.A) ratios were 16%, 18%, and 28%, respectively, in 2018.

However, BP has a strong upstream projects pipeline with 16 critical projects expected to start from 2019 to 2021. The company plans ~900 thousand barrels of oil equivalent per day of the new production, net to BP, by 2021.

Although the company’s earnings are estimated to fall in 2019, a rise in oil prices and better upstream volumes could lead to an upward revision for these estimates.

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