BP P.L.C. (BP) provided a very strong earnings report on Monday. The company is making substantial progress in recovering from the gulf oil crisis. In addition, the company is hiking its dividend and showed solid earnings and revenue growth. The report provided myriad reasons why BP is a core part of my portfolio.
Key highlights from BP's earnings report
- Profits were up 38% over last year and revenues increased 15% over that time span.
- The company raised its dividend by 14%.
- The company stated it expects net cash flow to increased 50% from FY2011 to FY2014 if oil stays at current prices.
- Management expects to complete all payments related to the gulf oil spill by the end of year.
4 reasons BP is still a solid buy at $46 a share:
- With the dividend hike, BP now yields over 4%. Given the increasing cash flow it expects over the next few years, future significant hikes seem highly likely.
- The chart for the stock is showing increasing technical strength and it crossed over its 200 day moving average in January (See Chart).
- Even with a very nice run up in its stock price over the last few months, BP is still selling in the bottom third of its five year valuation range based on P/E, P/S and P/B.
- BP has a forward PE of just over 7. This is approximately 10% to 20% lower than other oil majors Chevron (CVX) and Exxon (XOM). In addition, BP's price to revenue ratio (.41) is less than half of these two oil majors.
