Friday - Wells Fargo has adjusted its price target on BP (NYSE:BP) shares, lowering it to $41.00 from the previous $42.00, while maintaining an Equal Weight rating on the stock.
The revision comes as the analyst at the financial services firm recalibrated second-quarter estimates for the oil and gas company, citing several factors influencing the decision.
The analyst's commentary pointed to adjustments in volumes and lower realizations within BP's Gas & Low Carbon Energy (G&LCE) segment. Additionally, the changes reflect decreased refining margins in the Customers & Products (C&P) division.
Despite these modifications, the firm's forecasts for production, depreciation, depletion, amortization (DD&A), operating expenses, overburden and conveyor (OBC), working capital, and capital expenditures are in line with BP's own guidance.
The new estimates for BP's second-quarter earnings have been set at $0.88 per share, down from the previous $1.08, positioning them below the consensus estimate of $1.06.
The analyst has based the new price target on a 3.5 times multiple of the firm's projected 2026 enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA).
Investors are now looking at a slightly more conservative outlook for BP, as reflected in the revised price target. The Equal Weight rating suggests that Wells Fargo views the company's stock as fairly valued at the current levels, indicating neither a particular bullish nor bearish stance. As market participants digest this information, BP's stock performance will continue to be influenced by both internal operational factors and broader market conditions.
In other recent news, BP has shifted its strategy, slowing down renewable projects to focus on oil and gas. The company's new CEO, Murray Auchincloss, has implemented a hiring freeze and halted the launch of new offshore wind projects.
This change aims to address investor concerns over the company's energy transition plan. BP also acquired a 50% stake in BP Bunge (NYSE:BG) Bioenergia, a Brazilian sugar and ethanol joint venture, for $1.4 billion.
Shell (LON:SHEL) is set to strengthen its position in the liquefied natural gas (LNG) market by acquiring Singapore-based LNG company Pavilion Energy. The acquisition is expected to contribute to Shell's goal of increasing its purchased LNG volumes by 15-25% compared to 2022.
California is pursuing oil profits in a climate deception case against Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX), Shell, BP, ConocoPhillips (NYSE:COP), and the American Petroleum Institute. The lawsuit accuses these energy corporations of causing extensive damages and deceiving the public regarding their role in climate change.
The U.S. Supreme Court is consulting with President Joe Biden's administration regarding a lawsuit filed by Honolulu against several major oil companies. The lawsuit alleges that these companies have made misleading statements about the effects of their products on the environment.
Finally, the latest shallow water auction for oil and gas exploration in Trinidad and Tobago attracted interest from BP, Shell, and EOG Resources (NYSE:EOG). These companies submitted six bids for four of the thirteen blocks on offer.
InvestingPro Insights
In light of Wells Fargo's recent price target adjustment on BP shares, InvestingPro data and tips provide additional context for investors considering the oil and gas giant's stock. The company's market capitalization stands at $96.17 billion, with a P/E ratio of 10.91, reflecting its current valuation in the market. Notably, the adjusted P/E ratio for the last twelve months as of Q1 2024 is even more attractive at 8.7, hinting at a potentially undervalued position.
InvestingPro Tips suggest that BP's management has been proactively engaging in share buybacks, which could indicate confidence in the company's future prospects and a commitment to returning value to shareholders. Moreover, BP has a history of consistent dividend payments, maintaining them for 33 consecutive years, and currently offers a dividend yield of 4.92%, which is compelling for income-focused investors.
While three analysts have revised their earnings downwards for the upcoming period, it's important to note that the company is still expected to be profitable this year and has been profitable over the last twelve months. Additionally, the stock is trading near its 52-week low, which could represent a buying opportunity for value investors.
Investors interested in deeper analysis and additional insights can explore more InvestingPro Tips for BP at https://www.investing.com/pro/BP. For those considering a subscription, use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. There are 9 additional InvestingPro Tips available, offering a comprehensive view of BP's financial health and market position.
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