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BP’s Earnings Are Expected to Fall 8% in 2019

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Jun. 11 2019, Updated 2:59 p.m. ET

BP’s earnings estimate

BP (BP) is a British integrated energy company with downstream, upstream, and Rosneft segments. BP’s earnings are expected to fall 8% to $3.5 per share (or American depositary receipt) in 2019.

In 2018, BP’s adjusted EPS stood at $3.8. The fall in its earnings has been led by a lower crude oil estimate for the year. However, BP is expected to post EPS of $0.9 in the second quarter of 2019, up ~7% YoY.

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BP has a strong upstream project pipeline, which is expected to bring in hydrocarbon growth. Since 2016, BP has started 22 upstream projects. Further, in 2019, the company plans to begin another two projects. In 2020 and 2021, BP expects to start 11 new projects. Overall, the projects, which began in 2016, are cumulatively expected to contribute new production, net to BP, of ~900,000 barrels of oil equivalent per day by 2021.

Valuations and dividends

BP is trading at a forward PE of 10.9x, below the peer average of 12.1x. The lower valuations the market accords to BP could be due to its debt and cash flow position, which doesn’t look comfortable. BP’s total debt-to-capital ratio of 43% stood above the peer average in the first quarter. A higher debt ratio reduces a company’s financial strength and flexibility to handle tough times. In comparison, Royal Dutch Shell’s (RDS.A) and Total’s (TOT) ratios stood at 32% and 33%, respectively, in the first quarter.

However, BP’s dividend yield stands at 6.0%, higher than the peer average of 5.1%. BP paid $1.4 billion in dividends in the first quarter of 2019. The company bought back $50 million worth of shares in the quarter.

Overall, BP has a relatively high dividend yield, but its earnings are expected to fall in 2019.

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