Morgan Stanley lifts TotalEnergies stock rating to Overweight

On Monday, Morgan Stanley (NYSE:MS) upgraded TotalEnergies (EPA:TTEF) SE (TTE:FP) (NYSE: TTE) stock from Equalweight to Overweight, setting a price target of EUR 55.30. The upgrade comes as the oil and gas company maintains its financial strategy despite fluctuating oil prices and industry pressures. According to InvestingPro data, TotalEnergies operates with moderate debt levels and maintains strong financial health scores, with particularly robust cash flow and relative value metrics. The company appears undervalued based on InvestingPro’s Fair Value analysis.

TotalEnergies has shown resilience amid a challenging macroeconomic environment where other European oil majors have been revising their capital expenditure (capex) plans for 2025. Unlike its peers, TotalEnergies has not made such adjustments during the first quarter of 2025 earnings season. The company’s management has indicated there is room for spending flexibility if the economic situation deteriorates, but for now, they are sticking with their previously announced $17 billion organic budget guidance for 2025. With an EBITDA of $37.15 billion in the last twelve months and a healthy current ratio of 1.07, the company demonstrates solid operational performance.

The firm’s commitment to shareholder returns also remains firm, with the continuation of their policy to buy back $2 billion worth of shares per quarter, given market conditions are reasonable. This approach reflects TotalEnergies’ confidence in its financial strategy and balance sheet strength. InvestingPro data confirms management’s aggressive share buyback strategy, while highlighting the company’s impressive 49-year streak of consecutive dividend payments, with a current dividend yield of 4.83%.

The positive stance from Morgan Stanley suggests the investment firm’s belief in TotalEnergies’ ability to navigate through potential sector-wide cash generation challenges posed by lower oil prices. The company’s unchanged capex guidance and buyback policy provide a contrast to the adjustments seen by other companies in the sector.

TotalEnergies’ stock upgrade by Morgan Stanley could signal to investors that the company is well-positioned to uphold its financial commitments and strategy in the face of a volatile oil market. The Overweight rating indicates an expectation of TotalEnergies’ market performance to potentially outperform the average benchmark in the coming period. With a P/E ratio of 9.71 and strong return over the last five years, the company shows promising value characteristics. Discover more insights about TotalEnergies and access comprehensive analysis through the Pro Research Report, available exclusively on InvestingPro.

In other recent news, TotalEnergies has been making significant strides in various sectors. The company has secured a record deal with RWE (LON:0HA0) to supply its Leuna refinery in Germany with 30,000 tons of green hydrogen annually for fifteen years starting in 2030. This agreement marks the largest commitment to green hydrogen procurement in Germany, aligning with TotalEnergies’ goal to decarbonize its European refineries by 2030. In addition, TotalEnergies is considering importing green hydrogen from a project in Brazil, which could further support its European operations.

In the energy sector, TotalEnergies is set to sign an oil production-sharing contract with Guyana, diversifying the country’s oil sector. This move follows the government’s award of the block to a consortium led by TotalEnergies during an auction in 2023. On the financial front, Citi analysts have upgraded TotalEnergies’ stock rating from Neutral to Buy, raising the price target to €70.00. The upgrade reflects confidence in the company’s growth potential, particularly in its core Upstream business, which is expected to see volume and margin growth.

Meanwhile, offshore workers employed by TotalEnergies in the UK are contemplating strike action over a pay dispute, as reported by the Unite union. The disagreement stems from the workers’ rejection of a pay offer related to the 2025 pay claim. These developments highlight TotalEnergies’ active engagement in expanding its energy portfolio while navigating labor challenges.

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