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BP plc (BP) Appreciates 6.5% YTD: More Room for Upside Left?

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·4 min read
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BP plc’s BP shares have jumped 6.5% year to date (YTD) compared with 5.4% growth of the composite stocks belonging to the industry. The Zacks Consensus Estimate for BP’s earnings per share for 2021 and 2022 signifies year-over-year growth of 324.9% and 16.5%, respectively.

Zacks Investment Research
Zacks Investment Research

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Let’s delve into the factors behind the stock’s price appreciation.

What’s Favoring the Stock?

The price of West Texas Intermediate crude is trading at more than $77 per barrel, marking an improvement of more than 51% over the past year. With coronavirus vaccines being rolled out on a massive scale and the announcement that booster doses and antiviral pills are effective against Omicron, the economy will possibly overcome the recent spike in coronavirus cases. This is making the fuel demand outlook bright.

The latest decision by OPEC+ to continue to pump more oil further reassured that the effect that Omicron could have on fuel demand would possibly be mild. OPEC+ has decided to increase output collectively by another 400,000 barrels a day in February. The decision of OPEC+ has induced fresh momentum to the crude price rally.

The oil price positive trajectory is definitely a boon for BP’s upstream operations. The improving oil price scenario and increasing daily oil equivalent production volumes are aiding the energy giant’s bottom line. BP added that the target of net production of 900 thousand barrels of oil equivalent per day by 2021 from key new projects has been delivered.

BP is expected to gain from the refining business as well. The integrated energy player has a significant portion of its refining capacities in the United States. In the country, BP operates feedstock-advantaged and sophisticated refineries. The refineries are connected to strong logistics and fuels infrastructure. Thus, with a considerable presence in the United States, the energy major is well placed to capitalize on the rising fuel demand, backed by a wider distribution of vaccines.

BP is strongly focused on returning capital to shareholders. The integrated player recently announced that it intends to execute an additional $1.25 billion of share repurchases before declaring results for the December quarter. BP continues to anticipate that it will buy back $1 billion shares every quarter, considering the Brent crude price at $60 per barrel.

On the dividend front, BP projects a hike in annual dividend per ordinary share of 4% through 2025.

Numerous factors are aiding the stock price surge for BP, which is currently carrying a Zacks Rank #3 (Hold), creating more room for upside. One factor that could offset the positives to some extent is the fact that BP has more debt exposure than the composite stocks belonging to the industry.

Stocks to Consider

Some better-ranked players in the energy space include Murphy USA Inc. MUSA, Sunoco LP SUN and MPLX LP MPLX. While Murphy USA and Sunoco LP sport a Zacks Rank #1 (Strong Buy), MPLX carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Being a prominent retailer of gasoline and convenience merchandise, Murphy USA is well positioned to gain from the improving gasoline demand in the coming months. Having a network of retail gasoline and convenience stores in 27 states, Murphy USA is able to serve an estimated 2 million customers every day.

Over the past 30 days, Murphy USA has witnessed upward earnings estimate revisions for 2021 and 2022.

Sunoco generates stable cash flows since it is a leading independent fuel distributor in the United States. With a growing energy infrastructure platform, Sunoco LP secures roughly 2,500 commercial customers.

Over the past 60 days, Sunoco has witnessed upward earnings estimate revisions for 2021 and 2022. Overall, with the demand for traditional motor fuels expected to remain in place, Sunoco is well placed to continue generating stable cash flows.

Being an operator of midstream energy infrastructure and logistics assets, MPLX generates stable cash flows and has lower exposure to commodity price volatility. MPLX LP also generates cash flows from the fuel distribution business.

Over the past 60 days, MPLX has witnessed upward earnings estimate revisions for 2021 and 2022.


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Sunoco LP (SUN) : Free Stock Analysis Report

Murphy USA Inc. (MUSA) : Free Stock Analysis Report

MPLX LP (MPLX) : Free Stock Analysis Report

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