ConocoPhillips COP is set to report fourth-quarter 2024 results on Feb. 6, before the opening bell.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $1.89 per share, implying a decline of 21.3% from the year-ago reported number. Three analysts revised the estimate downward in the past 30 days against three upward movements. The Zacks Consensus Estimate for quarterly revenues is currently pegged at $14.5 billion, suggesting a decline of 5.4% from the year-ago actuals.

Image Source: Zacks Investment Research

COP beat the consensus estimate for earnings in three of the trailing four quarters and missed the same once, with the average surprise being 4.87%. This is depicted in the graph below:  

Q4 Earnings Whispers

Our proven model doesn’t predict an earnings beat for COP this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. That is not the case here.

The leading upstream energy player has an Earnings ESP of -1.77%. This is because the Most Accurate Estimate currently stands at $1.85 per share, lower than the Zacks Consensus Estimate. COP currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Factors Shaping Q4 Results

According to the U.S. Energy Information Administration, the average spot prices for West Texas Intermediate (WTI) crude at Cushing, OK, were $71.99 per barrel in October, $69.95 per barrel in November and $70.12 per barrel in December. The favorable crude pricing environment in the fourth quarter is likely to have benefited ConocoPhillips' exploration and production activities, potentially boosting the company’s production volumes.

Our model forecasts a 5% year-over-year increase in the company’s total daily oil equivalent production volumes. In the prolific Lower 48 region, which significantly contributes to COP’s production, daily oil equivalent volumes are expected to have risen 2.5% year over year, according to our model. Notably, Lower 48 represents the company’s high-quality unconventional resources in the United States.

Price Performance & Valuation

COP's stock has declined 7.3% over the past year against a 3.8% gain of the industry’s composite stocks.

Image Source: Zacks Investment Research

With the price decline, it appears relatively undervalued. The company's current trailing 12-month enterprise value/earnings before interest, tax, depreciation and amortization (EV/EBITDA) ratio is 5.02, which is trading at a discount compared to the industry average of 12.05.

Image Source: Zacks Investment Research

COP’s Investment Thesis

Late last year, ConocoPhillips completed the Marathon Oil acquisition. The integration has broadened ConocoPhillips' key Lower 48 portfolio while enabling it to expand its presence in prolific, low-cost U.S. basins such as Eagle Ford, Bakken, Delaware and Permian, adding more than 2 billion barrels of resources.

The leading upstream energy company has consistently prioritized acquisitions that support its long-term objective of enhancing stockholder value. With the completion of the deal, ConocoPhillips anticipates achieving annual savings exceeding $1 billion by integrating operations and expects the savings to be fully realized within the next 12 months. 

However, its exclusive focus on exploration and production makes it vulnerable to oil price volatility, posing greater challenges during downturns compared to diversified majors like Exxon Mobil Corporation XOM and Chevron Corporation CVX.

Also, the future of the Willow Project remains uncertain, casting a shadow over COP’s long-term growth. While Trump’s pro-oil stance could pave the way for expansion, environmental concerns and Biden-era restrictions continue to pose significant hurdles. If full approval is denied, COP may lose access to a vast oil and gas reserve, limiting its ability to scale production. This uncertainty underscores the company’s reliance on regulatory shifts, shaping its growth trajectory.

Last Word

While COP offers promising long-term potential and appealing valuations, investors should remain patient and monitor the resolution of ongoing uncertainties. Those already holding the stock are advised to maintain their position.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Chevron Corporation (CVX) : Free Stock Analysis Report

Exxon Mobil Corporation (XOM) : Free Stock Analysis Report

ConocoPhillips (COP) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research