Global Courant
Bank of America believes that European oil companies are about to reach a turning point. The Wall Street bank said that despite a quarter-on-quarter decline in oil, European gas, refining margins and an average of 2% more consensus cuts for 2023, stock prices for most major oil companies have risen. This trend reflects investor expectations for a long-awaited turn in earnings momentum, according to Bank of America analysts. “Within our European Big Oil coverage, we believe that consensus estimates have been reassessed – that there is no longer a downward trend on average for our Q2 2023 earnings expectations,” said BofA analysts led by Christopher Kuplent in a research note to clients on July 14. The note was titled “Europe’s Big Oils are near bottoming out.” However, analysts said there is a difference between the companies and investors are likely to reward some stocks more than others. It named Shell as its “Big Oil top pick”. The shares of the British company are traded on the stock exchanges of London, New York and Amsterdam. The table below shows the major European oil companies, earnings release dates, and Bank of America’s 12-month price target and upside. Shell As the top choice, Bank of America expects Shell to report strong second quarter results and cash flows. The bank believes Shell’s investment case stands out as the company cuts capital expenditures for 2023-25, demonstrates financial discipline and demonstrates above-average resilience in its cash flow framework. BofA predicts that Shell’s third-quarter buyback guidance will cross the $2.5 billion floor and consensus expectations are around $3 billion. Shares of the company are up 3% this year – one of the largest among Big Oil stocks – and are expected to rise another 31% over the next 12 months. BP In contrast, BofA analysts painted a less promising picture for BP. They said that while BP impressed investors with share buybacks and dividend expectations that beat expectations during last year’s fourth quarter results, BP faced a number of challenges. The unfavorable outflow of working capital during the first quarter has eroded BP’s ability to maintain a flexible approach, putting more pressure on BP to rethink its shareholder distribution policy, the analysts said. “As a result, we see net debt rising slightly – limiting distributions to BP shareholders given credit rating upgrades remains pending,” the analysts said. BP shares are traded in London and New York. While the stock has been flat this year, BofA expects it to rise 16% over the next 12 months. TotalEnergies Bank of America forecasts adjusted operating income of $7.7 billion for TotalEnergies’ second-quarter earnings, well below consensus of $7.9 billion. The bank also expects adjusted net income to be lower than consensus at $5.4 billion, down 20% from the prior quarter. TotalEnergies shares are traded in Paris and New York on the ticker TTE. The stock is down 8% so far, but Bank of America believes it will recover 44% over the next 12 months. “We see cash outflows, dividends and buybacks well covered and we expect TTE to extend its quarterly $2 billion buyback period into the second half of 2023,” the analysts said. Equinor The Wall Street bank said that while Equinor, a Norwegian state-owned company, is experiencing some downside to its earnings consensus on cash flow expectations, its forecasts underestimate working capital inflows. The analysts said the pace of inflows could provide tailwinds for free cash flow coverage of dividends and buybacks, which could boost stock prices. Equinor shares are traded in Oslo and New York. The stock is down 12% this year, but is expected to reverse those losses by rising 17.5% from current levels over the next 12 months.
