On Tuesday, shares of ConocoPhillips experienced a decline following reports from TheFly.com indicating that several bank analysts had issued lower price targets for the oil major. This adjustment was attributed to an ongoing trade war and recent drops in oil prices. However, on Wednesday, the company’s stock rebounded, rising by 2.3% and effectively recovering the prior day’s losses.
The primary driver behind this recovery was the reversal in oil prices, which saw an upward trend. According to OilPrice.com, oil inventories increased by 500,000 barrels last week. While this typically suggests lower prices due to supply and demand dynamics, the U.S. Energy Information Administration highlighted that despite the rise in crude supplies, inventories of gasoline and middle distillates such as diesel and kerosene decreased by approximately 2 million barrels each.
Reacting to this mixed news, investors pushed oil prices higher on Wednesday. The latest reports showed WTI crude oil prices rising by 2% to about $62.60 per barrel, while Brent Crude saw an increase of 1.9%, reaching just under $66 per barrel.
For ConocoPhillips, this situation could be seen as advantageous. Generally, with the rise in oil prices, oil stocks tend to follow suit. However, caution is advised regarding the temporary nature of a one-day shift in oil prices or ConocoPhillips’ stock price. Despite a trailing P/E ratio of 11.8, which indicates the stock might not be overly expensive, factors such as trade tensions, tariff issues, and analyst expectations of only 4% annualized long-term earnings growth suggest that the stock may not be a substantial bargain.
Though ConocoPhillips offers a commendable 3.6% dividend yield, its free cash flow remains less than ideal, standing at under $8 billion compared to a reported net income of $9.2 billion based on S&P Global Market Intelligence data. Considering these factors, other stocks like ExxonMobil, which offers faster growth and better dividends, might present more attractive opportunities for energy investors.
Rich Smith, the article’s author, does not hold positions in any of the stocks mentioned, and The Motley Fool also does not own positions in these stocks. The company maintains a disclosure policy.
