BP formed a three-week-tight pattern after the stock ran up following its latest earnings report that showed record profit in 2022. The global energy stock is Thursday's IBD 50 Stocks To Watch pick.
London-based BP finds and develops hydrocarbon resources, and operates oil and gas production assets, refineries, pipelines and terminals around the world. Their brands include BP, Amoco, Castrol, Aral, AmPm and Wild Bean Cafe.
The energy stock holds the No. 2 spot out of 20 stocks in the integrated oil & gas industry group. The group ranks a midway No. 108 out of 197 IBD groups. Ideally the CAN SLIM investing strategy looks for stocks in the upper 40 ranking.
BP Future Focus Shifts
BP plans on cutting back on its push into renewable energy, due to lower returns on the business, and focusing more on its oil and gas operations.
The company got caught by surprise on hearing that 3% of a London parking lot is electric. "We predicted that would happen in the middle of the decade. It's happened already," Bernard Looney, BP's CEO, said last week.
Brazil's Petrobras and BP currently collaborate on oil production off the Brazilian coast, which could boost the energy stock. They are in talks to work together on BP's solar energy and offshore wind energy efforts, despite BP saying it will reduce renewable energy business.
Energy Stock Gives A Second Chance To Buy
BP formed a three-weeks-tight pattern with a 41.48 buy point. It formed after the stock gapped up from a flat base with a buy point of 36.21, according to MarketSmith pattern recognition. A three-weeks-tight gives investors a new buy point to add shares to an existing position.
Shares are up 13% this year with a relative strength line near highs.
Record Profit In 2022, But Expected To Scale Back In 2023
BP reported solid Q4 earnings on Feb. 7. Quarterly EPS grew a tempered 29% while sales grew 35%.
The company earned $8.74 a share in 2022, more than double what it earned in 2021. BP was in good company, as Exxon Mobil, Chevron and Shell also posted record 2022 profits.
Higher oil and gas prices from the Russia-Ukraine war helped boost earnings. The company plans to increase U.S. shale production by 30%-40% by 2025.
Additionally, BP announced plans to increase spending by up to $1 billion per year on both oil and gas production, and renewables, including hydrogen, bioenergy and electrical vehicle charging networks.
BP also said it will use up to 60% of its excess cash for a share buyback this year, totaling $2.75 billion.
Analysts forecast $6.55 2023 annualized EPS, down from an extraordinarily high $8.74 in 2022, then declining to $6.13 in 2024.
The oil giant raised its dividend 10% to $6.61 per share, equaling a 3.4% annualized dividend yield, on top of a hike just two quarters ago.
BP is committed to being a net zero company by 2050 or sooner.
Follow Kimberley Koenig for more stock news on Twitter @IBD_KKoenig.
