Estimates for TOTAL S.A. (TOT - Free Report) have been revised upward over the past 60 days, reflecting analysts’ confidence in the stock. The Zacks Consensus Estimate for 2018 and 2019 earnings has moved 3.4% and 4.8% north to $5.53 and $6.26, respectively.
TOTAL’s return on equity, a profitability measure, is 10.2%, better than the industry average of 8.5%. This reflects the company’s efficiency in utilizing its shareholders’ funds.
Shares of TOTAL have rallied nearly 13.3% over a year compared with its industry’s growth of 9.0%. TOTAL’s strong production portfolio, initiatives to lower operating costs, improving cash flow and startup of new projects will boost its performance.
Let’s focus on the factors that make TOTAL a good investment option.
Growth Projections: The Zacks Consensus Estimate for 2018 and 2019 earnings per share is pegged at $5.53 and $6.26, reflecting a year-over-year improvement of 34.2% and 13.4%, respectively.
The company’s expected long-term earnings growth rate is pegged at 12%, much higher than the industry average of 7.5%.
Startup of Upstream Projects: TOTAL is presently working on a number of upstream projects and also concentrating on the proper execution of these projects, as well as lowering capital costs.
The upstream projects that have already come online and are likely to start production over the following years will help the company achieve its long-term production growth target of an average of 5% per year between 2016 and 2022.
Contribution From Acquisition: TOTAL, in order to capitalize on the rising global demand for liquefied natural gas (“LNG”), acquired Engie’s portfolio of upstream LNG assets to expand its LNG operation. This acquisition will help the company to manage an overall LNG portfolio of around 40 Mt per year by 2020. It also helped the company to build a position in the U.S. LNG market.
TOTAL’s acquisition of Maersk Oil last year further strengthened its position in the industry and created tougher competition for the super majors like Exxon Mobil Corporation (XOM - Free Report) , Chevron Corporation CVX and BP p.l.c. (BP - Free Report) .
Firm Capital Position: TOTAL boasts a robust capital position, aiding the company to return value to its shareholders through dividend hikes, share buybacks and pursuit of growth initiatives.
The start-up of new cash-accretive projects, plus contribution from new assets, mainly Maersk Oil, will continue to boost the cash-flow generation capability of the company. The strong cash-flow generation capacity enabled management of the company to increase its shareholders’ value through 10% annual dividend rate hike within the 2018-2020 time frame. Also, it plans to buy back shares worth $5 billion in the same time frame.
TOTAL currently has 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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