BP Pre-earnings Analysis
Chart done on daily timeframe. Investors are awaiting BP’s earnings later this week and nerves are high for the company’s first quarter earnings of the year. BP has disappointed its investors over the last three quarters, missing earnings expectations and declining in YoY revenue. The company longed reaped the benefits of oil demand after the Ukraine-Russia war erupted, but since then, gas prices and demand fell, hurting their revenue and bottomline. Earnings expectations are toned down this quarter so even if they come inline, it likely won’t be enough to move the needle in the short term.
In a longer term outlook, BP is actually one of the cheapest names in the energy sectors compared to its competitors. Trading at only a 7x P/E ratio, it is much lower than the average 15-25, placing it on the “cheap side” of things. American investors often overlook this name because it is a foreign investment out of the U.K., but that doesn’t make it any less appealing at this price point. BP’s hardships are likely to be short lived and oil/energy will always move in cycles, so the stock will follow along.
It’s a bit tough to say how their stock will do on these earnings. On one hand, their revenue has declined, but on the other hand, they’re trading at a very attractive price. BP’s options that expire on May 17th currently reflect a 38% implied volatility reading, which translates to about a $2.00 move on the underlying stock. The direction of that move depends on the earnings outcome and call.