ConocoPhillips (NYSE: COP), a pure-play oil and natural gas producer, is scheduled to announce its fiscal second-quarter results on Thursday, August 3. We expect ConocoPhillips stock to trade lower post Q2 with both revenue and earnings missing market expectations. Oil prices have been surprisingly lower than expected at the beginning of this year. However, oil prices have jumped recently – boosted by a falling U.S. dollar and tightening oil supplies globally. A report released by OPEC also kept an optimistic outlook for world oil demand despite weak economic growth. It raised its growth forecast for 2023 and predicted only a slight slowdown in 2024, with China and India expected to keep driving the expansion in fuel use.
Our forecast indicates that ConocoPhillips’ valuation is around $104 per share, which is 10% lower 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 slightly below the consensus estimates
Trefis estimates COP’s Q2 2023 revenues to be around $13.1 Bil, marginally below the consensus estimate. In Q1, ConocoPhillips posted total revenue of $15.52 billion, down from the $19.29 billion made in the same quarter last year. Q1 production increased by 45K boe/day to a quarterly record 1.79 million boe/day, including record Lower 48 production of 1.04 million boe/day, primarily driven by new wells online in the Lower 48 and improved well performance across the portfolio. The Lower 48 comprises the three U.S. shale basins (Eagle Ford, Bakken, Permian Basin) and the Gulf of Mexico production, but not Alaska. Almost 58% of the total output comes from production in the Lower 48 of which 38% of the output comes from the Permian Basin itself. Going forward, Conoco raised production guidance for Q2 to 1.77 million to 1.81 million boe/day.
(2) EPS likely to miss consensus estimates marginally
COP’s Q2 2023 earnings per share (EPS) is expected to be $1.93 as per Trefis analysis, missing the consensus estimate of $1.95. In the first quarter, the company’s net income was chopped in half to $2.9 billion, or $2.38 per share, from $5.8 billion, or $4.39 per share, in the year-earlier quarter. This was also because the company’s average realized price fell 21% year-over-year to $60.86 per barrel of oil equivalent (boe) per day in Q1 2023 from $76.99/boe a year ago.
(3) Stock price estimate lower than the current market price
Going by our COP’s Valuation, with an EPS estimate of around $9.76 and a P/E multiple of around 10.7x in fiscal 2023, this translates into a price of nearly $104, which is 10% lower 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 portfolio that aims for long-term growth? Here’s a value portfolio that’s done much better than the market since 2016.
|S&P 500 Return||3%||19%||105%|
|Trefis Multi-Strategy Portfolio||7%||28%||310%|
 Month-to-date and year-to-date as of 7/31/2023
 Cumulative total returns since the end of 2016