On Jan 10, ConocoPhillips COP was raised to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Earnings estimate revisions are at the core of the Zacks investment philosophy. Stocks that have recently seen upward revision in estimates tend to outperform the market over the next nine to 12 months.
Over the last 30 days, the Zacks Consensus Estimate for 2017 earnings has been revised higher from 54 cents to 57 cents. Also, for 2018, estimates were raised from $1.68 to $1.95.
ConocoPhillips — one of the largest exploration and production players in the world based on proved reserves and production — has an impressive earnings surprise history. The upstream player managed to surpass the Zacks Consensus Estimate in three of the prior four quarters, the average positive surprise being 152.3%. Also, we expect the company to witness year-over-year earnings improvement of 121.4% in 2017 and 243.4% in 2018.
The business scenario looks profitable as West Texas Intermediate (WTI) oil recently traded at $63.67 per barrel — last touched before Dec 9, 2014 — per Reuters. Also, natural gas is hovering around the psychological mark of $3 per million British Thermal Unit (BTU). Overall, the favorable commodity pricing scenario could fetch the exploration and production company attractive cashflow.
We also appreciate the company’s initiative to divest non-core assets as the explorer could use the proceeds in the lucrative Eagle Ford shale and Permian Basin. The proceeds will also help the upstream company lower debt that has accumulated owing to the persistent slump in oil over more than three years.
The positive developments are reflected in ConocoPhillips’ impressive pricing chart. Over the past year, the stock has gained 13.1%, outperforming the industry’s12.5% decline.
Other Stocks to Consider
A few other prospective stocks in the energy sector are Chevron Corporation CVX, Denbury Resources Inc. DNR and Cabot Oil & Gas Corporation COG. All the stocks sport a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
San Ramon, CA-based Chevron is a leading integrated energy player. The company is expected to post year-over-year earnings growth of 335% in 2017.
Headquartered in Plano, TX, Denbury is an upstream energy player. The company’s 2017 earnings are estimated to grow 125%.
Headquartered in Houston, TX, Cabot is involved in the exploration of oil and gas. The stock will likely report earnings growth of 357.1% in 2017.
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Chevron Corporation (CVX) : Free Stock Analysis Report
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Denbury Resources Inc. (DNR) : Free Stock Analysis Report
ConocoPhillips (COP) : Free Stock Analysis Report
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