Down 6% YTD, Will ConocoPhillips Stock Gain Following Q2 Results?

ConocoPhillips (NYSE: COP), a pure-play oil and natural gas producer, is scheduled to announce its fiscal second-quarter results on Thursday, August 1. We expect ConocoPhillips stock to trade higher post Q2 with both revenue and earnings beating market expectations marginally. COP stock is down 6% year-to-date to $110. In comparison, COP’s peer Exxon Mobil stock (NYSE: XOM) is up 17% this year to $117. In the first quarter, COP saw lower natural gas prices and increased costs offset higher oil production volumes. The company said it expects continued volatility in Q2 from its operations in the Permian Basin due to pipeline maintenance and third-party offtake constraints. Still, ConocoPhillips raised production guidance for Q2 to 1.91 million to 1.95 million barrels of oil equivalent per day (MBOED). That said, it would be prudent for investors to monitor how these projections play out and follow efforts to ensure its sustainability commitments are met.

COP stock has seen extremely strong gains of 175% from levels of $40 in early January 2021 to around $110 now, vs. an increase of about 45% for the S&P 500 over this roughly 3-year period. However, the increase in COP stock has been far from consistent. Returns for the stock were 80% in 2021, 63% in 2022, and -2% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that COP underperformed the S&P in 2023.
In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for other heavyweights in the Energy sector including XOM, CVX, and BP, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could COP face a similar situation as it did in 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?

Our forecast indicates that ConocoPhillips’ valuation is around $129 per share, which is 18% higher than the current market price. Look at our interactive dashboard analysis on ConocoPhillips Earnings Preview: What To Expect in Q2? for more details.

(1) Revenues expected to be slightly above the consensus estimates

Trefis estimates COP’s Q2 2024 revenues to be around $15.3 Bil, marginally above the consensus estimate. In Q1, ConocoPhillips posted total revenue of $14.5 billion, down from the $15.5 billion made in the same quarter last year. Despite the reduced demand, total company production for the quarter rose to 1.9 mboed, up 6% y-o-y. Lower 48 production averaged 1.05 mboed with 736 mboed in the Permian, 197 mboed in the Eagle Ford, and 96 mboed in the Bakken. The Lower 48 comprises the three U.S. shale basins (Eagle Ford, Bakken, Permian Basin) and the Gulf of Mexico production, but not Alaska. Almost 55% of the total output comes from production in the Lower 48 of which 39% of the output comes from the Permian Basin itself.

We forecast COP’s Revenues to be $60.8 billion for the fiscal year 2024, up 4% y-o-y.

(2) EPS likely to beat consensus estimates marginally

COP’s Q2 2024 earnings per share (EPS) is expected to be $2.02 as per Trefis analysis, beating the consensus estimate slightly. The company’s Q1 net income was down 13% y-o-y to $2.6 billion, or $2.16 per share, as the company’s averaged realized price fell 7% year-over-year (y-o-y) to $56.60 per barrel of oil equivalent (boe). This was mostly due to a 46% plunge in realized natural gas prices in the lower 48 states in the quarter; nearly half of COP’s total production volumes are natural gas or natural gas liquids. COP’s earnings were adversely affected by a milder-than-expected winter that lowered demand for heating fuel.

(3) Stock price estimate higher than the current market price

Going by our COP’s Valuation, with an EPS estimate of around $8.70 and a P/E multiple of around 14.8x in fiscal 2024, this translates into a price of nearly $129, which is 18% higher than the current market price.

It is helpful to see how its peers stack up. ConocoPhillips Peers shows how COP stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.