Analysts at Barclays remain bullish on BP (LON:BP), arguing that the outlook for the blue-chip oil major is clearer than the outlook for its peers. The comments come ahead of the energy group’s fourth-quarter results on February 6.
BP’s share price was steady in the previous session, adding 0.11 percent to close at 528p, underperforming the benchmark FTSE 100 index which ended trading 0.45 percent higher at 7,731.02 points. The group’s shares have added just under three percent to their value over the past year, as compared with a near seven-percent rise in the Footsie.
Barclays upbeat on BP
Barclays reiterated its ‘overweight’ rating on BP yesterday, valuing the shares at 675p.
“We expect it to become increasingly evident over the coming 12 months that BP can deliver a material and sustained improvement in free cash flow,” the broker’s analyst Lydia Rainforth commented, as quoted by Citywire, adding that the improvement would be driven by project start-ups already delivered at the end of last year, with this year’s start-ups adding to the momentum towards year end.
She pointed out that while there would be ‘bumps in the road’ for the FTSE 100 oil major over the next five years, “the direction of travel is far clearer for BP than it is for others”.
Analysts expect shares to re-rate
Citywire further quoted Rainforth as pointing out that the anticipated improvement remained “at odds with the valuation of the shares, with the dividend yield stubbornly remaining at six percent”.
“As investor confidence in the ability of BP to sustain and grow that dividend improves, we expect to see the shares re-rate,” she pointed out.
The comments are a boost for BP which earlier this month said that it was expecting a one-off non-cash charge of around $1.5 billion to its fourth-quarter results due to US President Donald Trump’s tax reform.