A prudent investor keeps adding well-performing stocks when the time is right and sells the risky ones. Strong fundamentals and favorable price performance indicate a stock’s bullish run.
BP plc (BP - Free Report) is among the leading integrated energy players in the world. The stock has performed well in the past six months and has the potential to sustain the momentum in the near term. Therefore, if you haven’t taken advantage of the share price appreciation yet, it’s time you add the stock to your portfolio.
Let’s take a look at the factors that make the stock an attractive pick.
A glimpse at the company’s price trend reveals that the stock has had an impressive run on the bourse in the past six months. BP’s shares have gained 8.7%, compared with the industry’s increase of 0.6%.
Solid Rank & VGM Score
BP sports a Zacks Rank #1 (Strong Buy) and carries a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities. Thus, the company is profitable investment proposition at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.
Positive Earnings Surprise History
BP has an impressive earnings surprise history. Its earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average being 29.6%.
Strong Growth Prospects
The Zacks Consensus Estimate for 2018 earnings is pegged at $3.34, which reflects year-over-year growth of 77.7%. Moreover, earnings are expected to register 2.4% growth in 2019.
Solid Growth Drivers
The integrated energy company has a strong portfolio of upstream projects, which have been backing impressive production growth. Through 2016 and 2017, BP has placed 12 key upstream projects online. All these developments drove the company’s record first-quarter 2018 production. Notably, since the October-to-December quarter of 2010, first-quarter output has been the highest. Additionally, the January-March quarter output marked an increase in production for six quarters in a row. Through 2021, BP expects production to grow at 5% per annum.
BP plans to add six key upstream projects through 2018. Among the new developments for 2018, Atoll in Egypt and Shah Deniz 2 gas development in Azerbaijan have commenced production. All the upstream projects that are either placed into operation or are yet to start will boost BP’s production by 900 thousand barrel of oil equivalent per day (MBOE/D) by 2021.
BP believes in active optimization of its portfolio. The company tries to create value over the long-term by finding ways to grow inorganically. For example, the company’s transaction in the Norwegian North Sea to form AkerBP as well as the merger of BP and Bridas assets to create Argentina’s largest private integrated oil and gas company — Pan American Energy Group or PAEG — emphasize its commitment to enhance shareholders’ value.
BP’s strategic partnership with Russia’s largest oil company, Rosneft, wherein it holds 19.75%, allows the company to manipulate the strategic direction as well as gain from a diverse set of existing and potential projects in the nation’s oil and gas sector. Currently, BP’s daily equity production in the country is 3.6 million barrels with an estimated 18.4 billion barrels of proved oil reserves, equivalent to 13.7 years of reserve life. Moreover, the company has reserves of 48 billion barrels across its upstream resource, which provides ample scope for growth through the next decade.
The company also proposes to invest about half a billion dollars annually in Alternative Energy business. This is in line with the company’s current focus to lower emissions. In this respect, BP plans to diversify by investing in Lightsource BP, Clean Energy, Fulcrum, and Butamax among others.
Other Key Picks
A few other top-ranked players in the same sector are Occidental Petroleum Corporation (OXY - Free Report) , China Petroleum & Chemical Corporation (SNP - Free Report) or Sinopec, and CVR Refining, LP (CVRR - Free Report) . All the stocks sport a Zacks Rank #1.
Occidental Petroleum is an international oil and gas exploration as well as production company. It pulled off an average positive earnings surprise of 30.2% in the last four quarters.
Sinopec is one of the largest petroleum and petrochemical companies in Asia. The company delivered an average positive earnings surprise of 492.8% in the trailing four quarters.
Sugar Land, TX-based CVR Refining is an independent downstream energy partnership with refining and associated logistics properties in the Midcontinent United States. The company delivered an average positive earnings surprise of 7.05% in the last four quarters.
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