Why The Analysts Are Wrong About BP Plc $BP
There are a lot of Turn Key Oil researched stocks that we feel have great prospects for any basket of oil & gas stocks. There are however others that we just think have too little upside even downside in the short to mid term that should be avoided but possibly considered buying opportunities if the value proposition is more attractive after a pull back. BP Plc is a prime example that has a lot of the over value we talked about in our previous Range Resources, Inc. caution.
None of the 14 analysts covering BP Plc (BP) have a sell recommendation on the stock due to its cheap valuations. However, we consider BP to be a value trap, given the fact that the company’s low valuations are justified by its low future growth prospects. The company’s decreasing aromatics margins, refinery margins, and gross and operating margins, along with divestitures, portrays its poor financial performance. BP’s second quarter earnings are below expectations, and far below its peers. Its earnings, after excluding the one-time line item, have significantly decreased by 30% over the last quarter. Moreover, environmental-friendly investors are ignoring the stock in their portfolios.
The recent news is again highlighting the Macondo disaster. The stock price will further face a downside due to the adverse consequences of the Deepwater Horizon disaster attached to the company. It has been witnessing tough litigation due to the Gulf of Mexico oil spill, and is expecting a huge fine of up to $20 billion. The U.S. Department of Justice is giving a tough time to the company because of its gross negligence and willful misconduct. The Deepwater Horizon disaster has been bringing grim news for the company, and has forced BP to sell its Gulf of Mexico assets, which are strategically located for global exploration and production. In our opinion, the realization of heavy fines will limit the company’s future growth prospects. Henceforth, we recommend investors to not take a long position in the stock.
BP, a giant in the oil and gas industry, is responsible for the production, exploration, refining and marketing of oil and gas. The 100-year old company is providing fuel, energy, lubricants, and petrochemicals to its customers. It has segregated its business operations into two segments, namely Refining & Marketing, and Exploration & Production. The company’s Exploration and Production business is engaged in the exploration and field development of oil and gas, storage facility, midstream transportation, processing, and trading and marketing of LPG and natural gas. Refining and Marketing is engaged in the marketing, refining, transportation, manufacturing and supply of crude oil and a variety of petrochemicals to a wide range of customers. It’s Refinery and Marketing business is further segregated into three businesses, including lubricants, fuels and petrochemicals. It is also working on alternative energy sources.
This is not an offer to buy or sell securities. Oil investment carries with it very high risks. The information contained within this site has not been nor will it be verified by Turn Key Oil and is subject to change at any time. We are not a United States Securities Dealer or Broker or United States Investment Adviser. Do your own due diligence and consult with a licensed professional before making any investment decisions. Please read our full disclaimer before making any decisions.