Factors You Must Pay Attention to Ahead of BP's Q2 Earnings

BP plc BP is expected to release second-quarter 2021 results on Aug 3.

In the last reported quarter, the British energy giant reported earnings of 77 cents per share, beating the Zacks Consensus Estimate of 43 cents owing to higher realizations of commodity prices. The integrated energy giant beat bottom-line estimates in two of the last four reported quarters, the average surprise being 9.4%. This is depicted in the graph below:

BP p.l.c. Price and EPS Surprise

BP p.l.c. Price and EPS Surprise

BP p.l.c. price-eps-surprise | BP p.l.c. Quote

Let’s see how things have shaped up prior to this announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for second-quarter earnings per share of 61 cents has witnessed no downward revision and four upward revisions in the past 30 days. The estimated figure suggests an improvement of 130.8% from the prior-year reported number.

The consensus estimate for second-quarter revenues of $34.5 billion indicates a 10.8% jump from the year-ago reported figure.

Factors to Consider

The price of West Texas Intermediate crude improved more than 20% in the June quarter of this year. In comparison with the year-ago quarter, the commodity price has improved drastically. The scale of the improvement can be represented as a price surge from the pandemic-hit low mark – when oil was in the negative territory  in April 2020 – to breaking the psychological barrier of $70 per barrel.

The significant improvement in the commodity pricing scenario was backed by the optimism that fuel demand will recover considerably this year, thanks to the rolling out of coronavirus vaccines at a massive scale.

Although higher crude price aided the integrated energy major’s upstream business, this was offset partially by lower expected production. Factors like divestments and seasonal maintenance activities, especially in Trinidad, the North Sea and Gulf of Mexico, will lower production sequentially, the company believes. 

The rolling out of vaccine has eased social-distancing measures, which has likely led to the recovery in refined products demand. The consensus estimate for daily refinery throughputs is pegged at 1,494 thousand barrels per day (MBbls/d), suggesting an improvement from 1,487 MBbls/d reported in the June quarter of 2020.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for BP this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases chances of an earnings beat. That is not the case here as you will see below.

Earnings ESP: The company’s Earnings ESP is 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 61 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: BP currently carries a Zacks Rank #3.

Stocks to Consider

Here are some companies from the Energy space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

Devon Energy Corp. DVN has an Earnings ESP of +0.15% and a Zacks Rank of 1. It is scheduled to report second-quarter results on Aug 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

EOG Resources, Inc. EOG has an Earnings ESP of +0.50% and a Zacks Rank #1. The firm is scheduled to release earnings on Aug 4.

Berry Corporation BRY has an Earnings ESP of +12.73% and is a Zacks #2 Ranked player. The company is scheduled to release second-quarter results on Aug 3.

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