BP (BP) Q2 Earnings Preview: CEO, Cash Flows, Future Growth and Liability All In Question
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Shares of BP Plc. (NYSE: BP) are trading higher ahead of the company's second quarter earnings release, expected before the market opens on Tuesday, July 27, 2010. Shares are up 5.2% to $38.77 today.
BP is expected to report EPS of $1.39 on revs of $72.60 billion. For the last quarter, BP had EPS of $1.79 on revs of $74.42 billion. Last year, for Q209, the company posted EPS of $1.01 on revs of $56.56 billion, a mixed result to the consensus.
Shares of the company had plummeted through the quarter, dropping 49% to $28.88 at the end of June. The stock is down 34% YTD.
For a simple valuation, BP is trading at a forward P/E of 6.5x FY10 EPS estimates, compared to 10.3x for Exxon Mobil Corp. (NYSE: XOM), 8.2x for Chevron Corp. (NYSE: CVX), and 5.8x for Transocean Ltd. (NYSE: RIG).
Data from Bloomberg shows that 7 analysts have a Buy, 5 have a Hold, and one suggests to Sell. The analyst price target consensus is $45.31, with a high of $58, and a low of $36.
Analyst Ratings Through the Quarter
At the end of April, Raymond James downgraded the shares from Outperform to Market Perform, following news of an oil spill in the Gulf of Mexico.
In May, Bernstein upgraded from Market Perform to Outperform, their price target increased by $2 to $58.
Benchmark upgraded BP from Hold to Buy, with a price target of $49, saying that the liabilities associated with the Gulf spill were already discounted in the stock.
Oppenheimer upgraded the shares from Perform to Outperform, with a price target of $55.
Summary
BP is expected to take provisions from $25 to $30 billion in connection with efforts to seal up the well in the Gulf of Mexico. The company has committed to establish a $20 billion fund for the cleanup, and said that it has paid out over $200 million in claims (as of July 16, to over 32,000 claims). Costs of the cleanup were estimated at $3.95 billion in mid-July.
Last week, the company sold $7 billion in Permian Basin and Egypt assets to Apache (NYSE: APA). BP also sold storage and pipelines to Magellan Midstream (NYSE: MMP) for $289 million.
One recent news bit is that CEO Tony Hayward may be on the chopping block when the company reports their earnings tomorrow, and Robert Dudley is expected to replace him. A meeting will be held by the company’s Board tonight to determine any management changes.
In mid-June, the company suspended their quarterly dividend amid uproar from many Americans and pressure at the top from President Obama. No restart date or talks have come from BP as they focus their efforts on the Gulf cleanup and related costs and liability.
Of course, talks of a takeover loom over the company. The latest rumor included Exxon Mobil (NYSE: XOM), though nothing has been confirmed. BP exec's would have a fiduciary duty to consider any offer that is beneficial to shareholders.
One of the main things investors will want to focus on is cash flows, exuding the clean-up costs. Investors will need to see if the cash flows are holding up strong enough pay the future liability from the spill.
In addition, investors will want to find out how much future growth plans at BP have been hampered by the Gulf spill. Also, now that the spill have been temporarily capped, does the company have an estimated cost on liabilities? Will they establish a litigation fund? How much?
BP p.l.c. is expected to release their Q210 earnings on Tuesday, July 27, 2010, at approximately at 0700 (BST). Stay tuned to StreetInsider.com's Earnings section to see our analysis of the highly-anticipated quarterly results within seconds of their release.
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BP is expected to report EPS of $1.39 on revs of $72.60 billion. For the last quarter, BP had EPS of $1.79 on revs of $74.42 billion. Last year, for Q209, the company posted EPS of $1.01 on revs of $56.56 billion, a mixed result to the consensus.
Shares of the company had plummeted through the quarter, dropping 49% to $28.88 at the end of June. The stock is down 34% YTD.
For a simple valuation, BP is trading at a forward P/E of 6.5x FY10 EPS estimates, compared to 10.3x for Exxon Mobil Corp. (NYSE: XOM), 8.2x for Chevron Corp. (NYSE: CVX), and 5.8x for Transocean Ltd. (NYSE: RIG).
Data from Bloomberg shows that 7 analysts have a Buy, 5 have a Hold, and one suggests to Sell. The analyst price target consensus is $45.31, with a high of $58, and a low of $36.
Analyst Ratings Through the Quarter
At the end of April, Raymond James downgraded the shares from Outperform to Market Perform, following news of an oil spill in the Gulf of Mexico.
In May, Bernstein upgraded from Market Perform to Outperform, their price target increased by $2 to $58.
Benchmark upgraded BP from Hold to Buy, with a price target of $49, saying that the liabilities associated with the Gulf spill were already discounted in the stock.
Oppenheimer upgraded the shares from Perform to Outperform, with a price target of $55.
Summary
BP is expected to take provisions from $25 to $30 billion in connection with efforts to seal up the well in the Gulf of Mexico. The company has committed to establish a $20 billion fund for the cleanup, and said that it has paid out over $200 million in claims (as of July 16, to over 32,000 claims). Costs of the cleanup were estimated at $3.95 billion in mid-July.
Last week, the company sold $7 billion in Permian Basin and Egypt assets to Apache (NYSE: APA). BP also sold storage and pipelines to Magellan Midstream (NYSE: MMP) for $289 million.
One recent news bit is that CEO Tony Hayward may be on the chopping block when the company reports their earnings tomorrow, and Robert Dudley is expected to replace him. A meeting will be held by the company’s Board tonight to determine any management changes.
In mid-June, the company suspended their quarterly dividend amid uproar from many Americans and pressure at the top from President Obama. No restart date or talks have come from BP as they focus their efforts on the Gulf cleanup and related costs and liability.
Of course, talks of a takeover loom over the company. The latest rumor included Exxon Mobil (NYSE: XOM), though nothing has been confirmed. BP exec's would have a fiduciary duty to consider any offer that is beneficial to shareholders.
One of the main things investors will want to focus on is cash flows, exuding the clean-up costs. Investors will need to see if the cash flows are holding up strong enough pay the future liability from the spill.
In addition, investors will want to find out how much future growth plans at BP have been hampered by the Gulf spill. Also, now that the spill have been temporarily capped, does the company have an estimated cost on liabilities? Will they establish a litigation fund? How much?
BP p.l.c. is expected to release their Q210 earnings on Tuesday, July 27, 2010, at approximately at 0700 (BST). Stay tuned to StreetInsider.com's Earnings section to see our analysis of the highly-anticipated quarterly results within seconds of their release.
Market Moving News and Intelligence - Free Sign-Up
http://www.streetinsider.com/premium_content.php
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