Market Overview

Sector-Leading Cash Flows Make BP A Buy

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  • BP plc (ADR) (NYSE: BP) shares are down nearly 19 percent year-to-date, after touching a high of $43.60 on April 22.
  • Canaccord Genuity analyst Richard Griffith upgraded the rating on the company from Hold to Buy, while raising the price target from 415p to 430p.
  • BP’s sector leading FCF generation over the next few years makes the stock an attractive investment, Griffith believes.

Analyst Richard Griffith mentioned that BP remains ahead of its peer group because of its “sector-leading free cash flow generation forecast over the next few years and a share price that is now at a five year low and only 10% above the post Macondo low.”

“Macondo triggered a restructuring and simplification of BP's business well in advance of the peer group programmes that were launched in early 2014, and that have been ramped up since due to the crude price fall,” Griffith mentioned, while adding that the stock valuation does not yet reflect the transformation.

BP is committed to maintaining its current quarterly dividend of 10 cents per share, implying a FY15 dividend yield of 7.7 percent. Griffith believes that the company can comfortably do so over the 2016-2017 period, while requiring only a modest gearing increase in 2015.

In the report Canaccord Genuity noted, “If BP delivers the FCF generation we expect the market will draw confidence in the dividend sustainability and rerate the shares. The key risks we see in the medium term remain commodity price uncertainty and project execution.”

Latest Ratings for BP

Feb 2018Morgan StanleyDowngradesOverweightEqual-Weight
Feb 2018Societe GeneraleUpgradesHoldBuy
Sep 2017BMO CapitalUpgradesMarket PerformOutperform

View More Analyst Ratings for BP
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