The bullish case for ConocoPhillips COP is based on a plethora of encouraging company-specific tailwinds and favorable industrywide dynamics, according to BMO Capital Markets.
The Analyst
Analyst Phillip Jungwirth initiated coverage of ConocoPhillips' stock with an Outperform rating and $78 price target.
The Thesis
BMO's bullish case for the energy stock is based on the following factors, Jungwirth said in a Monday note:
- Expectations for "robust" free cash flow of $6.4 billion in 2018 and $6.3 billion in 2019.
- Investors can expect to see increased stock buybacks and dividend growth through at least 2022.
- Around 70 percent of the company's production is tied to Brent, which gives it better exposure versus the 30-percent average for large cap peers.
- Conoco's net income and cash flow per barrel and return on capital employed should come in better than the group average.
- The company's near-term production growth outlook of 1,235MBOE/day is strong and implies a 7.4-percent growth rate. The momentum should continue through 2019 with an expected 6.3-percent production growth rate.
- The company's low capital-intensive asset base supports longer-term production growth.
- The lower 48 business segment has historically underperformed across multiple financial metrics, but natural gas divestitures coupled with a strong growth outlook in Eagle Ford and Delaware should improve cash margins and profitability.
- Conoco also boasts one of the best Bakken positions when considering its scale and productivity.
- The Alaska segment should see "modest" growth, as the company is the largest producer in the state on a net basis.
- The company's LNG and oil sands assets are expected to see stable production over the coming years and generate meaningful free cash flow.
- Conoco's stock looks attractive based on multiple metrics, including dividend yield, EV/EBITDA, P/E, P/CF and free cash flow yield.
Price Action
Shares of ConocoPhillips were trading higher by 1.86 percent at the time of publication Monday afternoon.
A Pair Trade In E&P: Bernstein Upgrades ConocoPhillips, Downgrades Concho
ConocoPhillips Looks To Seize PDVSA's Oil Cargo In Curacao
Photo courtesy of ConocoPhillips.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
date | ticker | name | Price Target | Upside/Downside | Recommendation | Firm |
---|
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.