Despite a decline in Q1 profits, BP plc stock (NYSE: BP) could potentially see growth in the long term, with plans for a $1.75 billion share buyback in the first quarter of FY 2024 as part of a $3.5 billion commitment. The company aims to buy back shares worth at least $14 billion by 2025, supporting its stock price. However, BP’s net debt increased to $24 billion, and cash flow fell, impacted by working capital build. With OPEC+ extending oil production cutbacks and expectations of weaker global demand, BP plans to reduce costs by $2 billion by the end of 2026.
Despite strong gains in recent years, BP has underperformed the S&P 500 index, with returns of 30% in 2021, 31% in 2022, and 1% in 2023. The Trefis High Quality Portfolio, consisting of 30 stocks, has consistently outperformed the S&P 500. Looking ahead, uncertainty in the macroeconomic environment, including high oil prices and elevated interest rates, could impact BP’s performance compared to the S&P 500. For the full year 2024, BP expects slightly higher upstream production, with oil production expected to increase while gas and low-carbon energy production may decline. Capital expenditure is projected to be around $16 billion in 2024.
Revenue for fiscal year 2024 is forecasted to reach $218 billion, with earnings per share estimated at $4.54. Based on these forecasts, BP’s valuation is expected to reach $41 per share, offering a 15% premium from the current market price. Apart from traditional oil and gas production, BP is increasing investments in charging stations, biofuels, hydrogen fuels, and fueling stations. The company aims to be a net-zero company by 2050 or earlier, with plans to capture 10% of the hydrogen market in its core areas. BP is investing heavily in renewable energy, with plans to build significant renewable energy capacity by 2025 and 2030 through partnerships and acquisitions.
Compared to its U.S. counterparts, BP has invested more in non-hydrocarbon energy, aiming to transition into a clean energy player. The company has acquired renewable energy and travel center companies, with plans to expand its presence in bioenergy and offshore wind energy. BP’s strategy aligns with its goal of reducing reliance on traditional oil and gas and increasing focus on renewable energy sources. As the company continues its transformation, investors may see growth potential in BP’s stock despite recent challenges in the energy sector and global markets.
Investors can compare BP’s performance to its peers and industry benchmarks to assess its competitiveness and growth prospects. By analyzing key metrics and industry trends, investors can make informed decisions about investing in BP and other energy companies. The future outlook for BP hinges on its ability to navigate the changing energy landscape, capitalize on renewable energy opportunities, and deliver sustainable growth for shareholders in the long run.
