Earnings Growth, Dividend Hike Make Us Bullish On BP Plc

We have changed our stance to positive on BP plc (BP) based on its impressive earnings growth of up to 40 percent, dividend increase of 12.5 percent and its current restructuring efforts. Its rising refinery margin, operational efficiencies, plans to increase investment in its upstream business segment and high free cash flow growth in the coming years make it a good stock for value investors. In our opinion, it is expected to increase its production capacity significantly in the fourth quarter after the completion of its ongoing maintenance projects and on the expected start-up of its new lucrative projects. BP has strategically aligned its business operations to cater to the upcoming oil consumption growth of 0.9 million barrels per day in 2013, according to a report by U.S Energy Information Administration. Therefore, we recommend investors to take a long position in the stock.

BP is currently trading at a price to sales ratio of 0.3x, at discount when compared to its competitors Exxon Mobil (XOM) and Chevron (CVX) with P/S ratios of 0.94x and 0.96x, respectively. It is trading at a forward price to earnings of 7.5x, P/B of 1.1x and EV/ Revenue of 0.4x, which are at significant discount when compared to its peers in the industry. Read more