BP plc (BP - Free Report) is expected to register solid growth in the near future. Notably, the British energy giant surpassed the Zacks Consensus Estimate for earnings in the trailing four quarters, the average positive surprise being 16.8%. Moreover, it has an expected earnings growth rate of almost 10% for the next five years, compared with the industry’s 6.7%.
Let’s delve deeper to find out why this Zacks Rank #3 (Hold) stock is worth retaining in your portfolio at the moment.
What’s Working in Favor?
BP has a portfolio of key upstream projects that will continue to fetch significant cashflow. Since 2016, the company has brought 22 major upstream projects online that will help it achieve its target of producing an additional 900 thousand barrels of oil equivalent per day volumes by 2021. In fact, production volumes from the projects have been helping the company report better-than-expected earnings in the prior four quarters.
Apart from the projects that have already been placed online, the company is planning to start up several new projects beyond 2019, improving the production outlook.
Moreover, over the past five years, the company has been consistently paying higher dividend yields than the industry it belongs to. In order to return capital to shareholders, the company has also been repurchasing shares. In the first nine months of 2019, the company spent $340 million to buy back 52 million ordinary shares.
What’s Deterring the Stock?
The company expects turnaround activities to continue to hurt its downstream business in the December quarter of 2019. BP also expects industry refining margin to be seasonally lower in the fourth quarter compared to the third.
Moreover, the company’s balance sheet has significantly more exposure to debt as compared to other stocks belonging to the same industry. This is primarily because of BP’s acquisition of shale resources in the United States last year from BHP Billiton for $10.5 billion.
Stocks to Consider
Some better-ranked players in the energy space are Murphy USA Inc (MUSA - Free Report) , CNX Resources Corporation (CNX - Free Report) and Contango Oil & Gas Company (MCF - Free Report) . While Murphy USA sports a Zacks Rank #1 (Strong Buy), CNX Resources and Contango Oil & Gas carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Murphy USA beat the Zacks Consensus Estimate in three of the prior four quarters.
CNX Resources surpassed the Zacks Consensus Estimate in two of the prior four quarters, the average positive earnings surprise being 34.8%.
Contango Oil & Gas is likely to see bottom-line growth of 87% in 2019.
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