If you are still holding on to BP plc (LON:BP)’s (NYSE:BP) stock, it is time you reconsider it as the chances of reaping handsome returns from it are bleak.
Over the past three months, the stock has lost 8.6%, underperforming the 5.6% collective decline of the stocks belonging to the industry. Further, the company’s Zacks Rank #5 (Strong Sell) reflects its innate weakness.
Things Working Against
BP’s balance sheet is significantly more levered than the industry it belongs to. Its debt-to-capitalization ratio stands at 41.8%, considerably higher than the industry’s 26.3%.
Apart from comparatively limited financial flexibility, the oil spill incident of 2010 in the BP-operated Macondo Prospect is affecting the company. Although BP has cleared the huge litigation fine related to the spill, it had to divest some of its best operating properties. The asset sales might keep BP from cashing in on opportunities.
Through 2018, the integrated energy firm has made a payment of $3.2 billion, after tax, associated with the oil spill incident in the Gulf of Mexico. BP continues to project oil spill payment of roughly $2 billion for 2019.
Moreover, the business scenario of the company’s large-scale upstream operations is not favorable given the weakness in the oil price scenario. With factors like soft demand and a crude oil supply glut hurting the commodity, the integrated energy player is unlikely to generate high returns from its upstream business.
The negative factors are being reflected in the downward earnings estimate revision of the stock for 2019. Over the past 30 days, the Zacks Consensus Estimate for BP’s 2019 earnings has been revised downward to $3.22 from $3.41. In fact, the consensus estimate calls for a year-over-year decline of 15.3%.
Stocks to Consider
Three prospective players in the energy space are Enterprise Products Partners L.P. (NYSE:EPD) , Helix Energy Solutions Group, Inc. (NYSE:HLX) and Approach Resources Inc. (NASDAQ:AREX) . All the stocks sport a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
Enterprise Products beat the Zacks Consensus Estimate for earnings in the last four quarters.
Helix Energy is likely to see earnings growth of 47.4% through 2019.
Approach has surpassed the Zacks Consensus Estimate for its bottom line in three of the last four quarters.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +98%, +119% and +164% in as little as 1 month. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>
Enterprise Products Partners L.P. (EPD): Free Stock Analysis Report
Helix Energy Solutions Group, Inc. (HLX): Free Stock Analysis Report
BP p.l.c. (BP): Free Stock Analysis Report
Approach Resources Inc. (AREX): Free Stock Analysis Report
Original post
Zacks Investment Research