BP (LON:BP) share price drops despite additional share buyback and slumps on outlook. The BP share price drops on Tuesday despite reporting strong profits in the third quarter.
According to BP’s trading report today, the oil firm pre-tax profits for the first nine months of 2021 amount to $8.7 billion. More impressive is the operating cash flow, which totalled $17.5 billion.
The buoyant oil market is lifting company’s cash flow, so much so that it announced an additional $1.25 billion share buyback on top of $1.4 billion buyback announced earlier. The board aims to spend 60% of its surplus cash flow on buybacks.
Meanwhile, BP’s net debt drops to $32 billion at the end of September. BP’s CEO Bernard Looney is pleased to tell shareholders “this has been another good quarter for bp.’
However the market did not rate results highly. BP share price skidded 2.5 percent in early morning trades. Perhaps investors are using the results to take profits from the recent rally.
At the time of writing, BP share price trades at around 345p.
BP share price is consolidating after a four-week rally to 363p.
Longer-term, however, the stock tends to correlate with that of crude oil’s trend. At the moment, the hydrocarbon energy is trading at around $85 per barrel, having started 2021 from $50.
For BP, the resistance at 360p is strong. This level dates back to April 2020. To force through this ceiling will certainly require more investor buying and some bullish catalysts from the oil market, say, oil prices breaking the $100 barrier.
BP’s long-term share price outlook is modestly bullish. But its near-term trend is choppy. Prices may test 340p as support.
As one of the oil majors in the world, BP (BP.) is a widely-followed company. Its market capitalisation of £71 billion is amongst the top 10 largest stock in the London Stock Exchange.
However, the consensus of the oil stock is not wholly bullish. According to a panel of 26 analysts as tracked by the Financial Times, 9 say ‘Hold’ while 3 recommend ‘Underperform’. This is hardly a vote of confidence in the company.
One reason for this depressed outlook is the paradigm shift in the energy consumption. The world is pivoting into a low-carbon setting in the next few decades, a pivot that will render BP gradually obsolete (a bit like Kodak).
The COP26 conference in Glasgow will further accelerate that trend.
Still, for the moment BP is raking into millions of profits every month and this should support the stock. Dividend yield is at a good 4.3%; while share buybacks are increasing earnings per share.
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