Here's Why You Should Bet on BP Stock Ahead of Q1 Earnings

Investors are closely monitoring BP plc BPas it prepares to announce first-quarter 2024 earnings on May 7, before the opening bell. Some investors are considering whether to buy shares of this large integrated energy company before its earnings release or wait for a more favorable entry opportunity.

Promising Price Trends

BP has proven to be rewarding since the beginning of 2024, gaining 9.3% year to date, exceeding the 8.7% rise of the broader Zacks Oil - Energy sector. The new management’s strong emphasis on the core oil and gas business and focus on returning capital to shareholders are among the key factors driving the outperformance.

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Image Source: Zacks Investment Research

Highly favorable oil prices, as evidenced by the average spot West Texas Intermediate crude oil prices per barrel in January, February and March of $74.15, $77.25, and $81.28, respectively, according to the U.S. Energy Information Administration’s data, are also bolstering the energy major's price performance. This might have supported BP’s first-quarter earnings. The integrated player expects lower industry refining margins in the March quarter to have partially affected the outperformance.

The Zacks Consensus Estimate for first-quarter earnings per share stands at $1.03, with revenues estimated at $61.8 billion. Notably, our proven model does not predict an earnings beat for BP this time around because 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. BP has an Earnings ESP of -3.56% and a Zacks Rank #2.  

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Optimal Moment for Investment

The price chart of BP may sustain its upward trajectory, driven by profitable refining and marketing assets, as well as by key oil and gas projects already operational or slated for completion this year and beyond.

According to the U.S. Energy Information Administration, crude oil prices are projected to stay strong, primarily due to geopolitical risks and the anticipation of substantial decreases in global oil inventories. Handsome oil pricing environment will thus continue to back the company’s exploration and production operations.

Unlike many other energy companies, the British energy giant can sail through periods of low oil prices, banking on its sizable refining and marketing businesses. In the United States, BP has a significant portion of its downstream operations, which are benefiting from the economic reopening.

BP boasts a robust share buyback program, aiming to repurchase $3.5 billion in the initial half of this year and a minimum of $14 billion through 2025. Throughout the predominant period of the past year, the company has consistently offered investors higher dividend yields compared to the sector, further strengthening the fact that the company is committed to rewarding shareholders.

Clearly, the favorable developments are benefiting the leading energy firm and presenting an excellent opportunity to invest in the stock. Also, the stock is somewhat cheap on a relative basis, with the current 2.74X trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization sitting below the 3.92X five-year median. Also, the company is trading at a discount to the Zacks Oil - Energy sector average of 3.01X.

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Image Source: Zacks Investment Research

Conclusion

Investors may find it advantageous to purchase the stock before May 7, given its higher dividend yield, substantial buyback programs, pipeline of upstream projects, significant downstream operations and attractive valuation.

Performance of Other Energy Giants

Exxon Mobil Corporation XOM and Chevron Corporation CVX are the two other integrated energy giants that have already reported first-quarter earnings last week. While ExxonMobil missed the Zacks Consensus Estimate for earnings in the first quarter, Chevron beat the consensus estimate for the same

One of the largest integrated energy firms, Shell plc SHEL, has reported earnings today. It said that it has once again achieved a quarter marked by robust financial and operational performance. Apart from reducing emissions, Shell is showcasing its strong commitment to generating handsome value for shareholders.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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