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TOTAL (TOT) Poised to Grow: Should You Hold the Stock?

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TOTAL S.A. continues to gain from new start-ups, joint ventures and acquisitions, which are helping it boost production. Moving forward, the company's cost management initiatives are likely to drive performance. However, its exposure to fluctuating commodity prices, and increasing competition of peers may impact profitability going ahead.

TOTAL is entering into strategic acquisition deals with operators in high potential areas and divesting assets that are not in sync with its long-term objectives. Toward this, it acquired assets worth $513 million and disposed assets worth $202 million during the third quarter.

Further, its agreement with Chevron Corporation (CVX - Free Report) to strengthen exploration portfolio in the Gulf of Mexico and recent announcement to acquire the liquefied natural gas (LNG) assets of Engie are anticipated to bolster performance. Additionally, the Maersk Oil & Gas A/S (Maersk Oil) acquisition deal, expected to close in the first quarter of 2018, will expand the company's operations globally. However, such asset acquisitions naturally expose the company to risks associated with uncertainties and other related risks.

The company plans to invest in the range of $14 billion in 2017 and $13-$15 billion annually from 2018 to 2020. Further, higher productions are anticipated going ahead owing to the recent start-ups, including the Al-Shaheen field in Qatar, Kashagan Field is an offshore oil field in Kazakhstan's, Moho Nord in Congo and Edradour-Glenlivet project in UK.

However, such a diversified global presence exposes the company to stiff competition from other oil and gas majors like Exxon Mobil Corporation (XOM - Free Report) and BP p.l.c. (BP - Free Report) for acquiring assets and licenses for the exploration and production of oil and natural gas as well as for the sale of manufactured products based on crude and refined oil. An increase in competitive pressure from its peers could impact sales, hampering TOTAL’s margins and market share in the global business.

Price Movement                           

Shares of TOTAL have returned 12%, underperforming the Zacks industry’s growth of 18.6% in the last six months.

Zacks Rank

TOTAL currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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