Analysts at JP Morgan reiterated their ‘overweight’ stance on shares of BP hailing the outfit’s ability to deliver sector-leading total shareholder returns and positive ‘skew’ to consensus estimates for the company’s earnings going forwards.
As they put it, with its fourth quarter results, BP had shown that it knew how to walk and chew gum at the same time, they said.
Regarding the chewing, BP had managed to translate “premium” free cash flow – to the tune of a FCF yield of 13.9% for 2022 – into sector leading TSR with the analysts anticipating cash returns over 2022-24 worth approximately 30% of its market capitalisation, against EU oils on 24%.
However, that had not broken its stride, with BP also executing on profitable portfolio greening.
JP Morgan said its estimates for the oil major’s earnings before interest, taxes, depreciation and amortisation were 20% beneath the company´s price-adjusted guidance.
The reason for that was the investment bank’s more cautious assumptions on BP’s downstream.
Even so, assuming Brent oil at $78 and $70 a barrel in 2022 and 2023, respectively, they were still 15% ahead of the Bloomberg consensus.
Hence the continued “positive skew” to consensus revisions.
The analysts also bumped up their target price for BP shares from 590.0p to 600.0p.
