Market Overview

BMO Offers 11 Reasons To Like ConocoPhillips

BMO Offers 11 Reasons To Like ConocoPhillips

The bullish case for ConocoPhillips (NYSE: 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. 

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Photo courtesy of ConocoPhillips. 

Latest Ratings for COP

Dec 2019Initiates Coverage OnBuy
Nov 2019MaintainsOverweight
Oct 2019MaintainsOverweight

View More Analyst Ratings for COP
View the Latest Analyst Ratings

Posted-In: BMO Capital Markets energyAnalyst Color Price Target Commodities Initiation Markets Analyst Ratings Best of Benzinga


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