ConocoPhillips (NYSE: COP), a pure-play oil and natural gas producer, is scheduled to announce its fiscal fourth-quarter results on Thursday, February 2. We expect ConocoPhillips stock to trade higher post Q4 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 in FY 2022 so far. ConocoPhillips produced $21.7 billion in cash provided by operating activities in the nine months that ended September 2022, almost double the roughly $11 billion it generated in the year-ago period. An increase in production and oil prices in the first half of 2022 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 as well).
Going forward, COP forecasts Q4 production of 1.74 million to 1.8 million barrels of oil equivalent (boe)/day and maintains its full-year expected production at 1.74 million boe/day. With respect to current inflationary impacts, the company increased its FY 2022 operating capital guidance to $8.1 billion compared with prior guidance of $7.8 billion, and adjusted operating cost to $7.7 billion from $7.5 billion previously.
Our forecast indicates that ConocoPhillips’ valuation is around $137 per share, which is 11% higher than the current market price. Look at our interactive dashboard analysis on ConocoPhillips Earnings Preview: What To Expect in Q4? for more details.
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(1) Revenues expected to be slightly ahead of consensus estimates
Trefis estimates COP’s Q4 2022 revenues to be around $18.5 Bil, marginally ahead of the consensus estimate of $18 Bil. Its Q3 production jumped 13.5% to 1.75 million boe/day from 1.54 million boe/day in the same period in 2021. The company’s Q3 total average realized price rose 46% to $83.07/boe from $56.92/boe realized in the year-ago quarter.
(2) EPS likely to beat consensus estimates
COP’s Q4 2022 earnings per share (EPS) is expected to be $2.84 as per Trefis analysis, beating the consensus estimate of $2.81. In the third quarter, ConocoPhillips’ net income nearly doubled to $4.5 billion, or $3.55 per share, from $2.4 billion, or $1.78 per share, in the year-earlier quarter.
(3) Stock price estimate higher than the current market price
Going by our COP’s Valuation, with an EPS estimate of around $14.31 and a P/E multiple of around 9.6x in fiscal 2022, this translates into a price of nearly $137, which is 11% 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.
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