Eyes Down For BP plc Results

It’s interim time for BP plc (LON: BP), and we should be seeing steady progress on the cash flow front.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

BPNext week is going to bring us a number of key FTSE 100 results, as interim season gets into full swing.

One of the big ones will be BP (LSE: BP) (NYSE: BP.US), due to report on its first-half performance on Tuesday 29 July.

Profits for the big oil companies can swing erratically year to year, and after a strong year last year we have a fall in earnings per share (EPS) of about a third forecast for the year ending December 2014. For 2015, there’s a small rise predicted, suggesting that EPS should settle around the 50p mark.

Dividends of about 24p are expected, and we’d see them covered twice by earnings — and that’s probably about right for a company that needs to make significant investments to keep future oil flowing.

Off to a good start

At Q1 time in April, chief executive Bob Dudley said the company had made “a very solid start to 2014“, telling us that cash flow was strong and that there had been some exploration success with some upstream projects started. He went on to say “We expect material growth in operating cash flow […] to deliver sustainable growth in free cash flow. This will support increasing distributions to our shareholders“.

During the period, BP came close to completing its $8bn share buyback programme, having reached the $7.6bn level. Future divestments will be used “primarily for distributions to shareholders, biased towards share buybacks“.

Do buybacks make more sense than handing out special dividends? They can do if the shares are fundamentally undervalued, and BP clearly seems to think that is the case at the moment. With the current share price of 492p giving us P/E multiples of only around 10 for the next two years, and with dividend yields at buoyant levels of 4.7 to 5%, I think so too.

The Gulf thing

BP is still suffering from a depressive effect of the Gulf of Mexico disaster, and while there are uncertainties surrounding legal issues in the US and the final financial toll, that will continue — it’s going to drag on for a few more years yet.

But for the moment, the net costs stand at $42.7 billion, and BP is contesting some claims that it believes to be unfounded.

What are the City’s brokers saying about BP shares? Well, the uncertainty has most of them on the fence with a Hold stance. But around a third of those offering opinions think we should Buy the shares, with almost none in the Sell camp.

No shocks please

There shouldn’t be any surprises in next week’s results — I’ll be quite happy with a “more of the same” outcome.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has no position in any shares mentioned. The Motley Fool has no position in any of the shares mentioned.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »