Goldman Sachs Steps To The Sidelines On ConocoPhillips Amid Continued Outperformance
Following strong outperformance since 2017 of ConocoPhillips (NYSE: COP), analysts considered share price appreciation and other factors in Tuesday’s downgrade.
The Analyst
Goldman Sachs analyst Neil Mehta downgraded ConocoPhillips from Buy to Neutral with a price target of $81.
The Thesis
The company has outperformed U.S. majors by 48 percent since 2017. Despite furthered optimism regarding the company’s strategy and execution, Mehta recognizes attractive upside elsewhere for several reasons.
ConocoPhillips previously outlined a $5 billion to $8 billion asset sale program in 2016, which was created to reduce debt, fund capital returns and improve the asset portfolio, according to Mehta.
“Since 2017, the company has completed a number of divestments, the largest being the sale of the Deep Basin and Foster Creek Christina Lake assets for $13.3 bn, rapidly accelerating COP’s debt reduction timeline," he wrote in a note.
Additionally, debt levels peaked in 2016, amounting to roughly $27 billion. But following larger than anticipated asset sales and strong cash generation, the company has reduced its debt to a mere $15 billion, Mehta reported.
“We view favorably COP’s strong cash generation potential underpinned by accelerated production profile from its high-margin unconventionals. We believe COP offers a peer-leading capital returns profile, driven by a disciplined and sustainable capital allocation program," Mehta said.
Price Action
ConocoPhillips shares were down 1.8 percent to $78.46 at time of publication Tuesday.
Related Links:
RBC Downgrades ConocoPhillips After Stock's Big 2018 Run
BMO Offers 11 Reasons To Like ConocoPhillips
Latest Ratings for COP
Oct 2018 | Goldman Sachs | Downgrades | Buy | Neutral |
Sep 2018 | Morgan Stanley | Maintains | Overweight | Overweight |
Sep 2018 | RBC Capital | Downgrades | Outperform | Sector Perform |
View More Analyst Ratings for COP
View the Latest Analyst Ratings
See more from Benzinga
© 2018 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
