BP shares sank in early trade on Tuesday after the oil major announced slowing profit that missed analyst estimates.
Earlier in October, we published a premium article explaining BP offers little value above 550p. We argued that the move higher in BP due to Saudi Arabian and Russian supply lacked conviction, and the BP share price was vulnerable to a pullback.
We also voiced concerns about the energy pricing mix and how this could impact BP’s earnings.
Today’s results revealed a punishing reduction in Q3 2023 profit that missed estimates. Underlying replacement cost profit was $3.3bn in Q3 2023 as revenue slipped to $54bn from $57bn a year ago.
BP shares were down 4.1% at the time of writing on Tuesday.
The main culprit in BP’s falling revenue and profit was weaker gas prices and trading activities. Lower oil prices also weighed on profit as oil refining margins fell.
BP is not alone in the oil sector in missing estimates; Chevron and Exxon recently released earnings weaker than analyst forecasts.
However, market sentiment is clearly turning against BP – a $1.5 billion share buyback did little to offset the shareholder disappointment around lower-than-expected earnings.
BP maintained its dividend at 7.27 cents per share.
With oil prices failing to maintain strength despite heightened geopolitical risks, the outlook for BP is increasingly uncertain, which is reflected in BP’s share price action today.