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Why Mizuho Increased Its Target Price on ConocoPhillips

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Mizuho increased ConocoPhillips’s target price

On June 26, Mizuho increased its target price on ConocoPhillips (COP) by $6 to $80 and changed its rating from a “neutral” to a “buy.” On June 25, COP closed at $59.77.

Among the 20 analysts tracking ConocoPhillips stock, 35% have given it “holds,” while 65% have given it “buys,” according to data compiled by Reuters. No analysts have recommended “sells” on the stock.

On June 20, UBS reduced its price target for ConocoPhillips (COP) by $2 to $70. On June 14, BMO reduced its target price on ConocoPhillips from $71 to $70.

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Second-quarter earnings results

On May 20, COP announced that it would report its second-quarter earnings results on July 30. Based on analysts’ consensus estimates, ConocoPhillips’s adjusted earnings could rise 10% sequentially. However, at the midpoint of its management’s guidance, its total production (excluding its Libya operations) could decline by 58,000 barrels per day, which could dent its revenue by 5.3%, according to Reuters estimates. But if COP decreases its production and operating costs like it did in the fourth quarter of 2018, then its lower revenue could translate into a higher EPS realization.

Moreover, US crude oil active futures and Brent futures, on average, were 9.2% and 7.3% higher in the second quarter of 2019 than in the previous quarter. This rise could help COP to adjust its losses arising from lost barrels. ConocoPhillips operates with a production mix of 65.2% in oil price–linked commodities and the rest in natural gas.

Mean target price

Analysts’ mean target price for ConocoPhillips is $77.25, which implies a potential upside of ~29.2% based on its last closing price. In comparison, the target prices for Occidental Petroleum (OXY) and Pioneer Natural Resources (PXD) suggest potential upsides of 28.1% and 35%, respectively.

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