BP (BP) will release its third-quarter earnings results on October 29. In the quarter, integrated energy companies faced severe business conditions such as lower oil prices, weaker downstream margins, and volatile equity markets. Against this backdrop, let’s review what Wall Street analysts expect from BP’s earnings.
BP’s third-quarter estimates
Wall Street analysts expect BP to post earnings per ADS (American depositary share) of $0.59 in the third quarter, 48% lower than its adjusted earnings per ADS in the third quarter of 2018 and 30% lower than its adjusted earnings per ADS in the second quarter. In comparison, in the previous quarter, its earnings stood at $0.84 per ADS, exceeding analysts’ estimate of $0.79 by about 7%. A 1% fall in its earnings was also better than analysts’ estimated fall of 7%.
In the third quarter, analysts expect BP’s revenue to fall 19% YoY to $64.2 billion. In the previous quarter, its revenue of $72.7 billion surpassed Wall Street’s estimate.
Earnings expectations by segment
Wall Street expects BP to see lower revenue and earnings due to weaker oil prices. Oil prices fell almost 8% in the third quarter, which would have pressured BP’s upstream realizations and revenue. Also, according to BP’s guidance, it expects its hydrocarbon production to fall sequentially in the third quarter.
In the quarter, BP’s upstream earnings could fall YoY (year-over-year) led by lower oil prices and possibly lower volumes. To learn more, read BP’s Earnings: Will Upstream, Downstream Slump in Q3?
Also, according to BP’s guidance, the company expects a lower level of turnaround activity in its Downstream segment in the quarter. Its downstream earnings could stay flat or see marginal upside or downside movement based on the possibility of a flat refining margin (as indicated by its refining marker margin) and higher throughput.
BP stock rises ahead of the third quarter
Since October 1, BP stock has risen 3.6% in anticipation of its earnings release. Its rise has been the highest among its peers. In the same period, the S&P 500 Index (SPX) has surged 1.6% on trade talk optimism and earnings expectations. WTI prices have also risen 0.6% so far in October.
Peers Chevron, Shell, and Total have risen 0.1%, 1.4%, and 1.5%, respectively, this month. However, ExxonMobil and Suncor have fallen 1.9% and 3.6%, respectively, month-to-date.
Analysts also expect BP’s peers’ earnings to fall in the third quarter. They expect Chevron (CVX), Suncor Energy (SU), and Royal Dutch Shell (RDS.A) to see YoY EPS falls of 31%, 25%, and 27%, respectively, in the period. They expect ExxonMobil’s (XOM) and Total’s (TOT) EPS to plunge 54% YoY and 40% YoY, respectively, in the quarter.
Second-quarter earnings recap
In the second quarter, BP’s adjusted earnings fell 0.4% YoY to $2.8 billion due to a fall in profits across its segments. Its earnings fell YoY in its Upstream, Downstream, and Rosneft segments.
BP’s Upstream adjusted EBIT fell 3% YoY to $3.4 billion in the second quarter due to weaker realizations partly offset by stronger volumes. The company’s hydrocarbon production increased by 7% YoY to 2.63 million barrels of oil equivalent per day in the second quarter.
Further, BP’s Downstream earnings fell 6% YoY to $1.4 billion in the quarter. The fall was the result of lower throughput due to turnaround activities. However, BP’s refining margins rose in the quarter.
The company’s adjusted EBIT in its Rosneft segment fell 17% YoY to $0.6 billion in the second quarter.