With shares of BP (NYSE:BP) trading around $43, is BP an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
BP is an integrated oil and gas company. The company provides its customers with fuel for transportation, energy for heat and light, lubricants and the petrochemicals products used to make everyday items as diverse as paints, clothes, and packaging. It operates in two business segments: Exploration and Production, and Refining and Marketing. BP provides essential energy products to consumer and companies worldwide. Without the oil and gas products provided, many consumers and businesses would not be able to operate on a daily basis. As businesses and consumers continue to need oil and gas products and services, BP stands to see rising profits.
T = Technicals on the Stock Chart are Mixed
BP stock has seen a downtrend over the last several years that has taken it to multi-year lows. The stock has recently bounced off of these lows and looks like it is putting together an uptrend. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, BP is trading above its untangling key averages which signal neutral price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of BP options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| BP Options | 16.1% | 0% | 0% |
What does this mean? This means that investors or traders are buying a very small amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| June Options | Flat | Average |
| July Options | Flat | Average |
As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very small amount of call and put option contracts and are leaning neutral to bullish over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Mixed Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on BP’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for BP look like and more importantly, how did the markets like these numbers?
| 2013 Q1 | 2012 Q4 | 2012 Q3 | 2012 Q2 | |
| Earnings Growth (Y-O-Y) | 192.3% | -78.97% | 8.03% | -124.38% |
| Revenue Growth (Y-O-Y) | 10.06% | 7.51% | -4.72% | -8.71% |
| Earnings Reaction | 2.28% | 1.35% | 2.78% | -4.59% |
BP has seen mixed earnings and revenue figures over the last four quarters. From these figures, the markets have had mixed feelings about BP’s recent earnings announcements.
P = Poor Relative Performance Versus Peers and Sector
How has BP stock done relative to its peers, Chevron (NYSE:CVX), Exxon Mobil (NYSE:XOM), Royal Dutch Shell (NYSE:RDSA), and sector?
| BP | Chevron | Exxon Mobil | Royal Dutch Shell | Sector | |
| Year-to-Date Return | 4.18% | 15.81% | 6.60% | -1.81% | 10.84% |
BP has been a relative underperformer, year-to-date.
Conclusion
BP provides essential oil and gas products and services to consumers and companies participating in growing industries worldwide. The stock has been in a long-term downtrend but may be currently positioning for a move higher. Over the last four quarters, BP has seen mixed earnings and revenue figures which has produced mixed feelings among investors. Relative to its peers and sector, BP has trailed significantly in year-to-date performance. WAIT AND SEE what BP does in coming quarters.
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