ConocoPhillips (NYSE:COP) — The dramatic fall in the price of crude has resulted in downward earnings adjustments to almost all oil producers, including ConocoPhillips. Yet, most analysts expect oil prices to move higher sometime this year and have based their 2016 earnings estimates on an improved, but conservative, price structure.
In late January, S&P Capital IQ lowered its 2015 outlook for ConocoPhillips. Its analysts now expect the company to report operating EPS of $1.21 this year, down from $5.30 in 2014. However, they expect earnings to rebound to $3.08 per share in 2016.
This international oil company’s focus on U.S. shale plays, especially in the Eagle Ford Shale, Permian Basin and Bakken Shale, is a positive. More than 55% of its capital expenditures are slated for North American resources with less dependence on higher-risk international resources.
Capital IQ has a 12-month price target of $72 on COP stock. Yet, it looks increasingly like oil may have bottomed or will bottom this year. If so, this should have a positive impact on earnings and, thus, share prices.
Technically, COP stock broke its bearish resistance line and 50-day moving average on Feb. 3, moving to neutral status after a 30% decline from its July high.
A preliminary signal of a possible bottom was flashed on Oct. 15 with the first of three buy signals from my proprietary indicator, the Collins-Bollinger Reversal (CBR), at $66.21. The most recent CBR buy occurred on Jan. 29 at $62.82. Each signal was accompanied by higher-than-average volume.
Recently, COP stock pulled back below its 50-day moving average at $66.41, which gives us an excellent opportunity to buy it as a trade or long-term investment.
I recommend traders buy COP stock under $65 with a target of $75 for a 15% return. Investors should buy shares for potentially higher gains and its 4.5% annual dividend yield.
