Investing.com — JPMorgan expects a stellar third-quarter earnings season for European oil and gas companies, led by refining, and favors U.K. supermajors Shell and BP, plus Eni, as it urges investors to be selective after the group’s outperformance.
Analysts led by Matthew Lofting wrote that “macro (still) trumps micro,” as faltering inventories across energy products and regions become harder to ignore while Middle East de-escalation remains elusive. After marking estimates to forward price strips, the team sees a 2027 free cash flow yield of 10.9% at $85 Brent, with earnings per share on average a mid-single-digit percentage above consensus.
Clear three-month outperformance suggests the strength is “well recognised,” and a rising tide tends to lift all boats, the analysts said. Policy remains a risk, given recent initiatives to curb diesel prices and debate over windfall taxes in Europe.
JPMorgan stays Overweight on Shell and BP and Neutral on TotalEnergies. Analysts see Shell as having advantaged capacity to exploit volatility, with accelerating buybacks, and say the next quarterly buyback could rise to $4 billion.
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They expect BP to show deleveraging at an inflection, with total financial obligations dropping $5 billion in the quarter and gearing improving by almost 400 basis points. The bank flagged that investors will “seek clear messaging on net disposal inclusive capital discipline following recent U.S. shale M&A reports.”
At TotalEnergies, JPMorgan expects a solid quarter, but sees diminished upside to full-year operational targets, and said extending 2% to 3% annual oil and gas growth to 2035 is still a work in progress.
The bank also remains Overweight Eni for its leverage to oil and gas prices, positive operational trends and potential for a special dividend. The analysts forecast a higher full-year buyback of €4 billion and special dividend capacity of up to €1 billion, or €0.31 per share, with gearing heading toward about 10% by year-end.
Among midcaps, refining margins hit records of $35 to $40 a barrel in the third quarter, versus a mid-cycle level below $10, but have recently moderated to about $15. If that persists, Analysts said they would “tread carefully.” JPMorgan stays Overweight Galp, citing non-price-dependent catalysts, and Underweight OMV, which lacks Middle East exploration sales and is more exposed to weak chemicals margins.
Original Article
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Source: finance.yahoo.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.
