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Pre Q2 Earnings: How Should You Play ConocoPhillips (COP)?
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ConocoPhillips (COP - Free Report) is set to report second-quarter 2024 results on Aug 1, 2024, before the opening bell.
The Zacks Consensus Estimate for second-quarter earnings is pegged at $2.06 per share, implying growth of almost 12% from the year-ago reported number. The estimate was revised downward by six analysts in the past 30 days against one upward movement. The Zacks Consensus Estimate for quarterly revenues is currently pegged at $15.1 billion, suggesting an almost 17% uptick from the year-ago actuals.
Image Source: Zacks Investment Research
COP beat the consensus estimate for earnings in three of the trailing four quarters and missed the same once, with the average surprise being 4.53%. This is depicted in the graph below:
Our proven model doesn’t predict an earnings beat for COP this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. That is not the case here.
The leading upstream energy player has an Earnings ESP of -3.36%. This is because the Most Accurate Estimate currently stands at $1.99 per share, lower than the Zacks Consensus Estimate. COP currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors Shaping Q2 Results
According to the U.S. Energy Information Administration, the average spot prices for West Texas Intermediate (WTI) crude at Cushing, OK, were $85.35 per barrel in April, $80.02 per barrel in May and $79.77 per barrel in June. The favorable crude pricing environment in the second quarter is likely to have benefited ConocoPhillips' exploration and production activities, potentially boosting the company’s production volumes.
Our model forecasts a 6.8% year-over-year increase in the company’s total daily oil equivalent production volumes. In the prolific Lower 48 region, which significantly contributes to COP’s production, daily oil equivalent volumes are expected to have risen 8.3% year over year, according to our model. Notably, Lower 48 represents the company’s high-quality unconventional resources in the United States.
Price Performance & Valuation
COP's stock has declined 3.2% over the past year against the energy sector’s rise of 7.6%.
Image Source: Zacks Investment Research
Despite the price decline, it appears relatively overvalued. The company's current trailing 12-month enterprise value/earnings before interest, tax, depreciation and amortization (EV/EBITDA) ratio is 5.66, which is trading at a premium compared to the energy sector average of 3.19.
Image Source: Zacks Investment Research
Investment Thesis
On May 29, ConocoPhillips finalized an agreement to acquire Marathon Oil Corporation (MRO - Free Report) in an all-stock deal valued at $22.5 billion, which also incorporates $5.4 billion in net debt. According to the terms, Marathon shareholders will receive 0.2550 shares of ConocoPhillips for each of their shares, marking a 14.7% premium over MRO’s previous day's closing price.
Despite investor concerns regarding the premium ConocoPhillips is offering and the accompanying debt it will incur, primarily leading to the stock price decline, the company's long-term outlook appears promising, buoyed by its history of acquiring low-cost assets.
However, its exclusive focus on exploration and production makes it vulnerable to oil price volatility, posing greater challenges during downturns compared to diversified majors like Exxon Mobil Corporation (XOM - Free Report) .
Last Word
Although COP has lucrative long-term prospects, investors should wait for a better entry point since the company is overvalued compared to the energy sector.
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Pre Q2 Earnings: How Should You Play ConocoPhillips (COP)?
ConocoPhillips (COP - Free Report) is set to report second-quarter 2024 results on Aug 1, 2024, before the opening bell.
The Zacks Consensus Estimate for second-quarter earnings is pegged at $2.06 per share, implying growth of almost 12% from the year-ago reported number. The estimate was revised downward by six analysts in the past 30 days against one upward movement. The Zacks Consensus Estimate for quarterly revenues is currently pegged at $15.1 billion, suggesting an almost 17% uptick from the year-ago actuals.
COP beat the consensus estimate for earnings in three of the trailing four quarters and missed the same once, with the average surprise being 4.53%. This is depicted in the graph below:
ConocoPhillips Price and EPS Surprise
ConocoPhillips price-eps-surprise | ConocoPhillips Quote
Q2 Earnings Whispers
Our proven model doesn’t predict an earnings beat for COP this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. That is not the case here.
The leading upstream energy player has an Earnings ESP of -3.36%. This is because the Most Accurate Estimate currently stands at $1.99 per share, lower than the Zacks Consensus Estimate. COP currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors Shaping Q2 Results
According to the U.S. Energy Information Administration, the average spot prices for West Texas Intermediate (WTI) crude at Cushing, OK, were $85.35 per barrel in April, $80.02 per barrel in May and $79.77 per barrel in June. The favorable crude pricing environment in the second quarter is likely to have benefited ConocoPhillips' exploration and production activities, potentially boosting the company’s production volumes.
Our model forecasts a 6.8% year-over-year increase in the company’s total daily oil equivalent production volumes. In the prolific Lower 48 region, which significantly contributes to COP’s production, daily oil equivalent volumes are expected to have risen 8.3% year over year, according to our model. Notably, Lower 48 represents the company’s high-quality unconventional resources in the United States.
Price Performance & Valuation
COP's stock has declined 3.2% over the past year against the energy sector’s rise of 7.6%.
Despite the price decline, it appears relatively overvalued. The company's current trailing 12-month enterprise value/earnings before interest, tax, depreciation and amortization (EV/EBITDA) ratio is 5.66, which is trading at a premium compared to the energy sector average of 3.19.
Investment Thesis
On May 29, ConocoPhillips finalized an agreement to acquire Marathon Oil Corporation (MRO - Free Report) in an all-stock deal valued at $22.5 billion, which also incorporates $5.4 billion in net debt. According to the terms, Marathon shareholders will receive 0.2550 shares of ConocoPhillips for each of their shares, marking a 14.7% premium over MRO’s previous day's closing price.
Despite investor concerns regarding the premium ConocoPhillips is offering and the accompanying debt it will incur, primarily leading to the stock price decline, the company's long-term outlook appears promising, buoyed by its history of acquiring low-cost assets.
However, its exclusive focus on exploration and production makes it vulnerable to oil price volatility, posing greater challenges during downturns compared to diversified majors like Exxon Mobil Corporation (XOM - Free Report) .
Last Word
Although COP has lucrative long-term prospects, investors should wait for a better entry point since the company is overvalued compared to the energy sector.