Integrated energy companies’ first-quarter estimates
In this series, we’ll rank integrated energy companies on the estimated YoY (year-over-year) changes in their EPS in the first quarter of 2019.
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All four companies mentioned are expected to post YoY falls in their earnings in the first quarter. BP is expected to see the lowest fall in its earnings. However, Chevron’s EPS are expected to fall 25% YoY in the first quarter, the highest among the companies under discussion in this series. Shell and ExxonMobil rank second and third in terms of the expected falls in their earnings in the first quarter.
These companies are expected to post declines in their earnings because of the likely falls in their upstream earnings and the anticipated falls in their downstream earnings. Oil prices, in terms of quarterly average, were lower YoY in the first quarter. Also, refining cracks have shown weakness. However, oil spreads have put up a mixed trend.
ExxonMobil, which is expected to post the third-highest fall in its earnings, is trading at the highest forward PE of 17.7x. ExxonMobil is financially sturdier than its peers with lower debt and a decent liquidity position. Shell, which is expected to post the second-highest fall in its earnings, has the lowest forward PE of 11.3x. Shell’s financials have strengthened, and the company has a bright earnings outlook for the next couple of years.
BP and Chevron’s valuations stand at 12.2x and 16.6x, respectively. BP’s weaker valuations are mainly the result of its relatively high debt (total debt-to-total capital ratio). In contrast, Chevron has the second-best debt position in the industry and a robust upstream portfolio.