BP: A 2014 Story To Start To Buy Now

| About: BP p.l.c. (BP)

"The greater difficulty, the more glory in surmounting it. Skillful pilots gain their reputation from storms and tempests." - Epicurus

To say the company formerly known as British Petroleum, that now goes by BP plc (NYSE:BP), has some tough years since the Gulf oil spill; is like saying the Chicago Cubs have had a bit of bad luck recently.

Being a contrarian, I bought the shares when there was some speculation the company would not survive the avalanche of civil and federal lawsuits that it was going to have to navigate as the result of this tragedy. In that time the stock has bounced back from under $30 a share to a current ~$44 a share. Most of that capital appreciation came early after I initialized a position. I have been holding since mainly because of the healthy and growing dividend yield.

However, after years of lawsuits and asset sales; it appears 2014 will be year the company's fortunes will change and the sun will come out again for this major integrated energy concern.

First of all, the vast majority of the company's litigation woes are behind it. When the city of Biloxi is trying to spend $15mm from a settlement from BP on a double AA baseball stadium, one can safely assumed just about everyone got their piece of the pie and then some.

In addition, BP has sold the vast majority of the assets needed to raise the funds to settle all litigation outstanding. Finally, earnings should rebound nicely in 2014. Earnings are tracking to post around $4.50 of EPS in FY2013 but the consensus currently calls for ~$5.20 a share in profit in 2014. In addition, after falling some 8% this fiscal year, revenues should improve to being flat in FY2014.

Valuation: This means that BP is currently selling for just ~8x forward earnings. The shares also yield almost five percent (4.9%). As it puts its litigation woes behind it and increases earnings, the dividend payout should continue to increase (payouts have increased ~30% since the company had to cut its payout in half immediately after the spill).

The shares have also just crossed over their 200 day moving average (See Chart). S&P has a $54 price target on BP which I think the shares can hit in the next 12-18 months as it puts the events of the past few years behind it. In way of comparison, Exxon Mobil (NYSE:XOM), another major energy concern, goes for 11x forward earnings and has a lesser dividend yield to boot.

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Disclosure: I am long BP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.