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Here's Why Hold Strategy is Apt for BP Shares Right Now

BP plc BP has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 30 days.

The stock, with a Zacks Rank #3 (Hold), has gained 5.3% in the past year against the industry’s 6.1% decline.


Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research


What's Favoring the Stock?

The West Texas Intermediate crude price is trading above the $70-per-barrel mark, highlighting a handsome commodity pricing environment. Despite uncertainties prevailing in the energy market on fears of recession, oil prices are highly favorable for exploration and production activities.

The favorable oil price scenario and increasing daily oil equivalent production volumes are aiding the energy giant’s bottom line. For the first quarter, BP’s total production increased 5.8% year over year to 1,360 thousand barrels of oil equivalent per day.For 2023, the energy giant anticipates reported and underlying upstream production to be unchanged from the prior year.

BP is expected to gain from the refining business. The integrated energy player has a significant portion of its refining capacities in the United States. In the country, the company operates as feedstock-advantaged and sophisticated refineries. Thus, with a considerable presence in the United States, the energy major is well-placed to capitalize on the solid fuel demand, backed by the reopening of the economy.

BP earned divestment and other proceeds worth $16.7 billion since the second quarter of 2020. The company expects $2-$3 billion of divestment and other proceeds for 2023, with a target to reach $25 billion between the second half of 2020 and 2025.

BP is also strongly focused on returning capital to shareholders. The integrated player announced that it was planning to repurchase $1.75 billion in shares before declaring the results for the June-end quarter. Notably, BP commits to using 60% of surplus cash flow for share buybacks and plans to allocate the rest to further strengthen the balance sheet.


BP’s balance sheet has significant debt exposure compared with the composite stocks belonging to the industry, which can affect its financial flexibility.

Key Picks

Some better-ranked players in the energy space are Murphy USA Inc. MUSA and Sunoco LP SUN, each currently sporting a Zacks Rank #1 (Strong Buy), and Enterprise Products Partners LP EPD, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Murphy USA announced first-quarter 2023 earnings per share of $4.80, which beat the Zacks Consensus Estimate of $4.06. The outperformance can be attributed to higher volumes and retail fuel contribution.

MUSA is committed to returning excess cash to its shareholders through continued share buyback programs. As part of this initiative, the motor fuel retailer recently approved a repurchase authorization of up to $1.5 billion following the completion of the existing $1-billion mandate. The move underscores MUSA’s sound financial position and commitment to rewarding its shareholders.

Sunoco reported first-quarter 2023 earnings of $1.41 per unit, beating the Zacks Consensus Estimate of $1.21. Better-than-expected quarterly earnings were primarily driven by higher contributions from the Fuel Distribution and Marketing segment.

For 2023, SUN revised its adjusted EBITDA guidance upward to $865-$915 million from the previously mentioned $850-$900 million.

Enterprise Products reported first-quarter 2023 adjusted earnings per limited partner unit of 64 cents, which beat the Zacks Consensus Estimate of 62 cents. This was primarily due to higher contributions from the Natural Gas Pipelines & Services business.

In the first quarter, Enterprise Products generated an adjusted free cash flow of $1,347 million against a negative free cash flow of $1,618 million in the year-ago quarter. EPD recorded a distributable cash flow of $863 million in the same time frame.

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BP p.l.c. (BP) : Free Stock Analysis Report

Enterprise Products Partners L.P. (EPD) : Free Stock Analysis Report

Sunoco LP (SUN) : Free Stock Analysis Report

Murphy USA Inc. (MUSA) : Free Stock Analysis Report

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