TOTAL S.A.’s (TOT - Free Report) strong production portfolio, initiatives to lower operating costs, reduce debts and start new projects will boost its performance.
Retaining this Zacks Rank #3 (Hold) stock in your portfolio now is a good idea, given the following positive factors. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Positive Growth Projections: The Zacks Consensus Estimate for 2017 earnings is $4.03, which reflects a year-over-year increase of 19.35%. For 2018, the Zacks Consensus Estimate for earnings is pegged at $4.68, representing a 15.95% rally.
TOTAL has long-term expected earnings per share growth rate of 7.50%.
Estimates Moving Up: The Zacks Consensus Estimate has witnessed upward revisions in the last 30 days. Estimates for 2017 have moved up 2.5% in the last 30 days and 2018 estimates moved up 7.6% in the same period.
Strong Return: TOTAL’s shares have rallied 5.9% in the last 12 months, outperforming the industry’s gain of 1.5%.
Positive Earnings Surprise History: TOTAL surpassed the Zacks Consensus Estimate in two of the last four quarters with an average beat of 2.12%.
TOTAL has one of the best production growth profiles among the oil super majors, characterized by an upstream portfolio with above industry-average exposure to the faster growing hydrocarbon producing regions of the world.
Recently, TOTAL announced that it has entered into a definite agreement to acquire Maersk Oil & Gas A/S (Maersk Oil) in a share and debt deal. This acquisition is expected to close in the first quarter of 2018. We believe the decision to acquire Maersk Oil will expand TOTAL’s operation globally and create tougher competition for the super majors like Exxon Mobil Corporation (XOM - Free Report) , Chevron Corporation (CVX - Free Report) and BP p.l.c. (BP - Free Report) .
TOTAL has been able to lower production cost substantially from $9.90 per barrels of oil equivalent (Boe) in 2014 to below $6 per Boe. Its cost savings initiatives will surely be of great help in expanding margins. TOTAL aims to achieve a $3.5 billion savings target in 2017 through its ongoing initiatives and has plans to save around $4 billion in 2018.
TOTAL also strengthened its balance sheet over the last few years. The net debt-to-equity ratio of the company at the end of second-quarter 2017 was 20.3%, down from 30% at the end of second-quarter 2016. It has been lowering its debts consistently and is working to achieve a net debt-to-equity ratio of 20%, which will lower the cost of capital of the company.
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