Earnings Beat In The Cards For ConocoPhillips Stock?

+10.79%
Upside
100
Market
111
Trefis
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COP
ConocoPhillips

ConocoPhillips (NYSE: COP), a pure-play oil and natural gas producer, is scheduled to announce its fiscal second-quarter results on Thursday, August 4. We expect ConocoPhillips stock to trade higher past Q2 with both revenue and earnings beating market expectations. Unlike many other oil companies, ConocoPhillips does not hedge its production. As a result of that strategy, the company has been able to capture the full upside of higher prices and generate a gusher of cash flow this year. ConocoPhillips produced $5.1 billion in cash provided by operating activities in the first quarter, more than double the roughly $2 billion it generated in the year-ago period. An increase in production and oil prices contributed to the surge in cash flow. In fact, all of COP’s efforts are devoted to finding and producing oil and gas at the lowest price and then selling it at the highest price – providing resilience during oil and gas downturns as well (COP saw a positive free cash flow in 2020). We expect the per-barrel price of oil to likely stay elevated for some time to come, despite cooling down to $93 at present. This is because sanctions against Russian oil exports still remain in place leading to a persistent tight market.

Our forecast indicates that ConocoPhillips’ valuation is around $111 per share, which is 17% higher than the current market price. Look at our interactive dashboard analysis on ConocoPhillips Earnings Preview: What To Expect in Q2? for more details.

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(1) Revenues expected to be well ahead of consensus estimates

Trefis estimates COP’s Q2 2022 revenues to be around $21.2 Bil, well ahead of the consensus estimate of $19.5 Bil. In Q1, COP’s oil and gas output averaged 1.747 million barrels of oil equivalent per day (BOE/d), a 220,000 BOE/d increase from the prior-year period. The company’s oil production was driven by its two highly accretive Permian acquisitions over the past 18 months. That said, COP realized $76.99 per BOE during the quarter, up 70% year-over-year, as it captured the full benefit of higher oil prices thanks to its unhedged production.

(2) EPS likely to comfortably beat consensus estimates

COP’s Q2 2022 earnings per share (EPS) is expected to be $4.12 as per Trefis analysis, beating the consensus estimate of $3.90. In the first quarter of 2022, the company posted adjusted earnings per share of $3.27 on an average realized oil price of $76.99 per barrel. The y-o-y increase in earnings was a huge 370% from $0.69 in Q1 2021.

(3) Stock price estimate higher than the current market price

Going by our COP’s Valuation, with an EPS estimate of around $11.30 and a P/E multiple of around 9.8x in fiscal 2022, this translates into a price of near $111, which is 17% higher than the current market price.

It is helpful to see how its peers stack up. ConocoPhillips Peers shows how COP stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Aug 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 COP Return -3% 31% 89%
 S&P 500 Return -1% -14% 83%
 Trefis Multi-Strategy Portfolio 0% -13% 242%

[1] Month-to-date and year-to-date as of 8/3/2022
[2] Cumulative total returns since the end of 2016

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