ConocoPhillips (NYSE: COP) – Q1 FY 2011 Earnings Preview
Tuesday, April 26, 2011 5:08 PM

The world's third largest oil company, ConocoPhillips (NYSE: COP), is expected to report its fourth quarter earnings on April 27, 2011. In the three quarters of fiscal 2010, EPS exceeded analysts' consensus estimates by margins ranging from 2.7 percent 7.1 percent. For the quarter ended December 2010, the company's reported EPS met analysts' consensus estimate of $1.32 per share.

For the first quarter, analysts' EPS estimates range from a low of $1.69 to $2.26 per share, compared with consensus estimates of $1.89 per share, or $1.47 per share in the year ago quarter. For this quarter, analysts' revenue estimates range from a low of $49.52 billion to a high of $73.40 billion, compared with a consensus estimate of $60.73 billion or $44.82 billion in the same quarter a year ago. For the quarter ended March, 2011, the consensus EPS forecast has been increased from $1.81 per share estimated 7 days ago to $1.89 per share.

In the last 52 weeks, COP has been trading in the range of $48.06 and $81.80. The last trading price of the stock was $79.12 on April 15. On April 5, 2011, analysts at JP Morgan upgraded ConocoPhillips stock rating to overweight from neutral.

ConocoPhillips is an international, integrated energy company. The company has six operating segments. Its exploration and production segment explores for, produces, transports and markets crude oil, natural gas, natural gas liquids and bitumen on a worldwide basis. The midstream segment gathers, processes and markets natural gas produced by ConocoPhillips and others, and fractionates and markets natural gas liquids, predominantly in the United States and Trinidad.

For the last quarter ended December 2010, ConocoPhillips reported earnings of $2.0 billion, compared with fourth-quarter 2009 earnings of $1.3 billion. During the fourth quarter of 2010, the company generated $6.2 billion in cash from operations, including $2.1 billion of working capital improvements, and received $3.1 billion in proceeds from asset dispositions.  For 2010, the company had earnings of $11.4 billion, compared with earnings of $4.4 billion in 2009. At year end, the company had $10.4 billion in cash and short-term investments. A significant portion of these funds are expected to be used for additional share repurchases. As of December 31, 2010, debt was $23.6 billion and the debt-to-capital ratio was 25 percent.

During the first quarter, ConocoPhillips' board of directors declared a quarterly cash dividend $0.66 per share, paid to the shareholders on March 1, 2011, to stockholders of record at the close of business on February 22, 2011. This represents a 20 percent increase in the dividend rate. ConocoPhillips also announced a program to repurchase up to $10 billion of the company's common stock. This plan is in addition to the existing $5 billion program announced on March 24, 2010, under which the company has repurchased approximately $4 billion of its common stock.

During the first quarter on FY 2011, on January 27, 2011, Three major American energy corporations – GE (NYSE: GE), NRG Energy, Inc. (NYSE: NRG) and ConocoPhillips (NYSE: COP) – joined forces to become a collaboration partner for emerging and innovative energy technology companies. The companies have committed $300 million in capital to the new joint venture, Energy Technology Ventures, to fund approximately 30 venture- and growth-stage companies over the next four years. The first investments are in companies developing potentially game-changing technologies in solar photovoltaic (Alta Devices), cleaner coal (Ciris Energy, Inc.) and non-food biofuels (CoolPlanetBioFuels).

In the major integrated oil and gas industry, ConocoPhillips competes with Exxon Mobil Corp. (NYSE: XOM), BP Plc (NYSE: BP), and Chevron Corp. (NYSE: CVX). Over the last year, Exxon Mobil reported revenues of $342.60 billion, and an EPS of $6.22 per share. BP Plc reported revenues of $297.51 billion, with loss of $1.19 per share. Chevron reported revenues of $189.61 billion, and earnings of $9.48 per share. On the other hand, Conoco reported revenues of $175.75 billion and an EPS of $7.62 per share.

ConocoPhillips has a total market capitalization of $115.18 billion. The company has a P/E ratio of 10.38, lower than the industry's average P/E of 15.25. The P/B and P/S ratio of the company is 1.65 and 0.66, respectively, compared with the industry's P/B and P/S ratio of 1.91 and 1.36, respectively. The net profit margin of the company is 4.23 percent, lower than industry's average margin of 6 percent. The ROE of the company is 17.34 percent, higher than that of the industry's ROE of 13.50 percent.



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