TD Cowen highlights top oil stocks ahead of earnings season
Investing.com -- TD Cowen analyst Jason Gabelman identified leading integrated oil companies positioned for strong third-quarter results, with TotalEnergies topping the list as excess cash generation builds across the sector.
The firm's earnings estimates stand roughly 20% above third-quarter consensus for both earnings per share and free cash flow, reflecting a rising commodity environment through the quarter that consensus has yet to fully capture.
1. TotalEnergies SE (NYSE: TTE) - TotalEnergies remains TD Cowen's top pick, with performance expected to benefit from its September 28 Investor Day. The analyst incorporated $0.35 per share trading outperformance for the company and expects roughly equal free cash flow beats. TotalEnergies ranks among the companies most likely to increase buybacks near term given payout targets.
2. Equinor ASA ADR (NYSE: EQNR) - TD Cowen favors Equinor's setup into earnings given the combination of strong gas prices and a lag on cash tax payments, which should result in very strong cash flows. The company should beat consensus earnings per share by the widest margin, while free cash flow should benefit from tax lags, reducing net debt to capital by more than 5% quarter over quarter. Equinor continues to pursue U.S. power and gas assets and has been reported as a bidding party in Uniper.
3. ExxonMobil Holdings Corporation (NYSE: XOM) - Some investors may rotate from Chevron back into Exxon Mobil, according to the analyst. Chevron has outperformed on Venezuela news, though additional questions around TCO extension could prompt investor rotation back to Exxon. TD Cowen includes a $1.50 per share timing headwind for Chevron, and observes that forecast free cash flow for both Chevron and Exxon show equal beats.