Argus Research analyst Philip Weiss reiterated his Buy rating on ConocoPhillips after the company’s investor meeting.
We have viewed the shares of BUY-rated ConocoPhillips as undervalued for some time, and think the company’s planned spinoff of its downstream business will help to further unlock the stock’s underlying value. Our target price is $85.
While COP’s long-term annual production growth rate of 3%-4% will likely lag thoseÂ of other independents, its production is oilier, benefiting cash flow and income. Additionally, we think its growth rate will be augmented by positive margin contributions from asset dispositions and share-repurchase activity. These factors should position COP to deliver 10%-12% annualized EPS growth. Similarly, we think the downstream company will be in a strong position given that its results will not be solely dependent on the crack spread. Downstream returns will be bolstered by Phillips 66′s holdings in chemicals and midstream joint ventures, the disposal of less profitable assets, and a renewed focus on assets providing higher returns. In addition, the dividend yield of both companies(estimated 5%+ upstream; 3%+ downstream) should be markedly higher than those of peers. In short, based on the company’s current market value, we believe that both the upstream and downstream businesses provide attractive opportunities for long-term share price appreciation, particularly for patient investors with a value-based approach.
Meanwhile, analysts were weighing in on Chevron following the company’s earnings guidance announcement yesterday. Morgan Stanley analysts reiterated an Overweight rating and $126 price target:
In-line interim update with modestly lower 1Q12 estimate due to intÂl production. Downstream results improved given higher refining and chemical margins. With 2012 production guidance reiterated, CVX has other growth projects in the queue leaving our full year EPS estimate almost unchanged.
However, Deutsche Bank analyst Paul Sankey reiterated his cautious view of oil stocks, and has a more nuanced Buy on Chevron, although he still thinks the stock should reach $130:
We remain underweight oil, defensively positioned and re-iterate defensive Chevron as a Buy, until we can find a reason to leap in and yell “it’s lovely once you’re in!” There are enormously bullish physical oil fundamentals, but horrible financial flows, such as a tumbling risk-off S&P that is taking oil with it. And our worry is that, like the clients we meet, investors will stay on the water’s edge, teetering but too nervous to jump into the overweight oil pool.
Although both names logged gains earlier in the day, they were drifting lower near the close.