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Does BP share price shout ‘value’ after its earnings report?

gave B.P (LSE:BP) shares were slightly lower on Tuesday (May 7) ahead of its Q1 results. The oil giant reported quarterly EBITDA of $10.3bn and core replacement cost – BP’s measure of profitability – of $2.7bn. That’s down from $5 billion a year ago.

Earnings missed expectations but BP kept pace with its buybacks. BP pointed to higher oil prices during the quarter ($83.2/bbl in Q1 24 vs $81.2 in Q1 23) but significantly lower gas prices ($/mmbtu 2.3 in Q1 24 vs $/mmbtu in Q1 24). 3.4 in Q1 23).

Going forward, the British energy giant pledged to do more to cut costs after overhauling its organizational structure.

What do analysts think?

When I’m trying to assess how much a stock is worth, I often start by looking at the average share price target. This, called the consensus, reflects the average price target issued by all Citi and Wall Street analysts covering the stock over the past three or 12 months.

The average share price target for BP is currently 606p. This is a 19.6% premium to the current share price. Such a premium is encouraging. The stock currently has seven buy ratings, six outperform ratings, three hold ratings, and one underperform rating.

While this data is promising, it’s worth keeping in mind that analysts aren’t always right. Discarding old share price targets is also often a good practice. Analysts don’t update their price targets as often as we might assume.

How does it compare with Shell?

BP is one of the Big Six oil companies. This is a group that includes, Chevron. Axon, AnnieAnd yesterday. The two U.S. stocks are by far the most expensive of the group, but they’re also the most efficient. Eni and Total are cheap, but this reflects their low margins.

ShellTherefore, other UK listed stocks are a good comparison. Here’s how the two companies compare on a price-to-earnings (P/E) basis, using projected earnings for the next three years.

P/E B.P Shell
2024 7.65 8.61
2025 7.46 8.36
2026 6.84 8.01

However, while BP may show better value than Shell, it is also the most indebted – partly because of the Deepwater Horizon disaster. Here’s how the two companies compare using the EV-to-EBITDA ratio, which takes debt into account.

EV to EBITDA B.P Shell
2024 3.19 4.07
2025 3.12 4.16
2026 3.1 4.15

The bottom line

On the surface, BP shares remain attractive, especially compared to peer Shell. Both companies have initiated programs to narrow the valuation gap with their US peers.

BP CEO Murray Achanclos said he would convert BP to A. “High Value Company” After its 2023 results. This includes plans to produce more oil in the medium term, increase its liquefied natural gas portfolio by 9 percent by the end of 2025 and commit to more buybacks.

I certainly don’t think BP is a bad investment opportunity, and I might be interested if an attractive entry point comes up. However, like its peers, it rises and falls with oil prices. Despite the long-term hope, this is always a risk.


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