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On Wednesday, JPMorgan reiterated its Overweight rating and $127.00 price target for ConocoPhillips (NYSE:COP) stock, aligning with the broader analyst consensus that sees significant upside potential. According to InvestingPro data, analyst targets range from $114 to $165, with the stock currently trading at levels that suggest it may be undervalued. The firm’s analysts highlighted the company’s recent fourth quarter performance, which surpassed expectations, and its forward-looking guidance for 2025, which includes a $10 billion capital return commitment. Despite these positive developments, ConocoPhillips shares have underperformed compared to their Large Cap E&P and U.S. Major peers over the past year, trailing by approximately 6% and 19%, respectively.
JPMorgan analysts noted that ConocoPhillips has typically outperformed its E&P peers in previous cycles due to the defensive nature of its portfolio, which features strong balance sheet, low sustaining capital expenditures, and a low-cost resource base. The underperformance is believed to be due to market concerns over potential risks to the company’s 2025 return of capital target, given the decline in oil prices, and a narrow view of the company’s long-cycle investment program.
ConocoPhillips management has emphasized long-term free cash flow (FCF) growth, with 2025 expected to be the peak year for long-cycle capital expenditures, estimated at around $3 billion out of the total $12.9 billion budget. Between 2026 and 2029, the company anticipates the completion of four long-cycle projects that will start contributing to FCF. CEO Lance pointed out an expected increase of $3.5 billion in cash flow from operations and $6.0 billion in incremental FCF relative to 2025 once these projects are operational. However, specific details on the timing or extent of the FCF increase have not been disclosed.
JPMorgan’s analysis suggests that the FCF inflection point may occur earlier than the market expects, with significant FCF growth likely in 2027-28, prior to the start-up of the Willow project. The research also indicates that ConocoPhillips has a substantial safety margin to achieve its $10 billion return of capital goal in 2025. Assuming current pricing, JPMorgan projects that ConocoPhillips will maintain a stable ending cash balance in 2025 after distributing $10 billion of FCF, factoring in CFO estimates and proceeds from asset sales to date.
In the context of a mixed macroeconomic environment, JPMorgan believes that E&P companies with strong defensive characteristics are better positioned to navigate uncertainty. The firm expects ConocoPhillips to deliver superior cash returns to investors in 2025-26, with return of capital yields estimated at approximately 8%, compared to an average of 6% for E&P peers. Excluding long-cycle investments, ConocoPhillips’ FCF yield is estimated at around 10% for the same period. JPMorgan views ConocoPhillips as a fundamental E&P holding due to its portfolio strength, inventory durability, and shareholder-friendly cash return framework.
In other recent news, ConocoPhillips reported its financial results for Q4 2024, surpassing market expectations with earnings per share (EPS) of $1.98, compared to the projected $1.79. The company also exceeded revenue forecasts, reporting $14.7 billion against an anticipated $14.27 billion. Despite these strong financial outcomes, ConocoPhillips experienced a 2% year-over-year decline in organic revenue and an increase in net debt to €773 million. Additionally, the company faces potential delisting and the postponement of its annual general meeting, which may affect investor sentiment. ConocoPhillips is focusing on strategic acquisitions and innovation, including AI-driven solutions, to support future growth. The company projects low to mid-single-digit organic revenue growth for 2025 and aims to maintain a focus on operational efficiency and innovation. Meanwhile, CompuGroup Medical (TASE:BLWV) announced a strategic partnership with CBC Capital Partners (WA:CPAP), which involved a significant change in shareholder structure. The company reported a 2% decline in organic revenue for 2024, but recurring revenues grew by 5%, now making up 75% of total revenues. CompuGroup Medical expects organic revenue growth in the low to mid-single digits for 2025, with continued positive development in recurring revenues.
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