Energy stock ConocoPhillips is the latest IBD 50 Growth Stocks To Watch pick as it eyes a new buy point after OPEC+ moved to slash oil output.
The Houston-based oil major is one of the largest explorers and producers in the world. Earnings have been gushing higher of late, with EPS surging 208% in the most recent quarter.
And oil prices could go higher after the Organization of Petroleum Exporting Companies plus Russia opted to slash production by 2 million barrels per day at its Wednesday meeting, starting in November.
The members defied pressure from the Biden Administration to maintain output.
The move comes after crude oil prices tumbled from nearly $120 per barrel in early June. West Texas Intermediate crude oil rose nearly 2% to almost $88 per barrel in late trading on Wednesday.
ConocoPhillips Stock Analysis
COP stock is eying a short consolidation buy point of 118.49. The relative strength line looks powerful, particularly on a weekly chart.
The energy stock previously attempted to break out of a cup-with-handle base with a 115.57 entry, MarketSmith analysis shows.
Then it triggered a sell rule after falling more than 7% below the buy point.
However, the stock subsequently found support at its 200-day moving average and then retook its 50-day line.
All-around excellent performance has earned a near-perfect IBD Composite Rating of 98. Recent earnings growth is exemplary, though previous struggles have lowered its EPS Rating to 81 out of 99.
The firm rolled out a new three-tiered program for shareholders at the end of last year. It features a base quarterly dividend, a supplementary variable dividend and share repurchases. COP stock currently pays a 1.6% annual dividend yield.
ConocoPhillips is in the top 2% of stocks in terms of price performance over the past 12 months as investors have piled into all sorts of energy stocks.
Energy stocks did well on Wednesday, lifting the Vanguard Energy Index Fund ETF nearly 3% . They are also big winners so far in 2022, with the fund up more than 42% year to date.
Analysts Back Energy Stock
CFRA analyst Stewart Glickman is rating COP stock a buy with a $126 target. He notes the oil major has moved to beef up operations.
"Historically, COP has been a conservative steward of capital, so we must acknowledge the sharp tack towards acquisitions that COP took in 2021," he said in a Sept. 24 research note. "Two different deals last year, with a combined outlay of almost $20 billion, vaults the company ahead on the Permian Basin, where we think onshore well economics remain strongest, but also raised debt ratios to the low 30% range."
Glickman notes the important deals came "well before" WTI crude spot prices passed the $80 per barrel mark. He also believes it will be easy for ConocoPhillips to restore the balance sheet to normal leverage "if spot prices remain strong."
Broad-based analyst sentiment is very bullish as well.
At the moment, 24 investment houses hold either a buy or an overweight rating on the energy stock. The average price target is $124.65 while the highest target is $153.
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