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Key Factors to Look for Ahead of BP's Q4 Earnings Release

Zacks Equity Research
·4-min read

BP plc BP is set to report fourth-quarter 2019 results on Feb 4.

In the last reported quarter, the company came up with earnings of 66 cents per American Depositary Share that surpassed the Zacks Consensus Estimate of 53 cents. Oil equivalent volumes from key upstream projects primarily contributed to the better-than-expected earnings performance.

Notably, the British energy giant surpassed the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 16.8%, as shown in the chart below.

BP p.l.c. Price and EPS Surprise

BP p.l.c. Price and EPS Surprise
BP p.l.c. Price and EPS Surprise

BP p.l.c. price-eps-surprise | BP p.l.c. Quote

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Let’s see how things have shaped up prior to the announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for fourth-quarter earnings of 65 cents has seen two upward and downward revisions each in the past 30 days. The figure suggests a year-over-year decline of 37.5%.

Further, the Zacks Consensus Estimate for revenues is pegged at $80.2 billion for the quarter, indicating a rise of 4.3% from the year-ago reported figure.

Factors to Consider

The crude pricing scenario through the December quarter of 2019 was weak year over year, acting as a major drag on BP’s upstream operations. The Zacks Consensus Estimate for revenues from upstream operations is pegged at $6,227 million, indicating a decline from the year-ago period’s $6,381 million.

This could have been partially offset by higher production volumes. The Zacks Consensus Estimate for fourth-quarter liquids production in the United States is pegged at 513 thousand barrels per day (MBbls/d), suggesting an increase from the year-ago level of 495 MBbls/d. The same for European operations is pegged at 172 MBbls/d, implying an improvement from the year-ago quarter’s 154 MBbls/d. From the rest of the world, production is expected to rise marginally year over year to 677 MBbls/d.

Weak oil prices are likely to have favored BP’s downstream business, since the company can purchase raw crude at lower prices to produce refined petroleum products. However, lower demand for the company’s end products, owing to a slowdown in the global economy, might have hurt refining operations. Moreover, it expects refining margins in the December quarter of 2019 to decline sequentially owing to continued turnaround activities. The Zacks Consensus Estimate for revenues from downstream operations is pegged at $68.7 billion, pointing to no change year over year.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for BP this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases chances of an earnings beat. That is not the case here as you will see below.

Earnings ESP: The company’s Earnings ESP is 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 65 cents per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: BP currently carries a Zacks Rank #3.

Stocks That Warrant a Look

While earnings beat looks uncertain for BP, here are some companies from the energy space that you may want to consider on the basis of our model. These have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

NGL Energy Partners LP NGL has an Earnings ESP of +36.84% and a Zacks Rank #1. The company is set to release quarterly earnings on Feb 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

Antero Resources Corporation AR has an Earnings ESP of +6.49% and a Zacks Rank #2. The company is set to release quarterly earnings on Feb 12.

Enbridge Inc. ENB has an Earnings ESP of +1.10% and carries a Zacks Rank #2. The company is scheduled to release quarterly earnings on Feb 14.

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NGL Energy Partners LP (NGL) : Free Stock Analysis Report
 
BP p.l.c. (BP) : Free Stock Analysis Report
 
Enbridge Inc (ENB) : Free Stock Analysis Report
 
Antero Resources Corporation (AR) : Free Stock Analysis Report
 
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Zacks Investment Research