ConocoPhillips Stock Buy Recommendation Reiterated (COP)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- ConocoPhillips (NYSE: COP) has been reiterated by TheStreet Ratings as a buy with a ratings score of B . The company's strengths can be seen in multiple areas, such as its expanding profit margins and growth in earnings per share. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

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Highlights from the ratings report include:
  • 37.40% is the gross profit margin for CONOCOPHILLIPS which we consider to be strong. Regardless of COP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, COP's net profit margin of 9.15% compares favorably to the industry average.
  • CONOCOPHILLIPS has improved earnings per share by 48.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, CONOCOPHILLIPS increased its bottom line by earning $5.87 versus $5.29 in the prior year. For the next year, the market is expecting a contraction of 2.1% in earnings ($5.75 versus $5.87).
  • COP, with its decline in revenue, slightly underperformed the industry average of 4.4%. Since the same quarter one year prior, revenues slightly dropped by 4.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • COP has underperformed the S&P 500 Index, declining 19.87% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 57.9% when compared to the same quarter one year ago, falling from $3,390.00 million to $1,426.00 million.

ConocoPhillips explores for, produces, transports, and markets crude oil, natural gas, natural gas liquids, liquefied natural gas and bitumen on a worldwide basis. ConocoPhillips has a market cap of $70.25 billion and is part of the basic materials sector and energy industry. The company has a P/E ratio of 10.8, below the S&P 500 P/E ratio of 17.7. Shares are down 0.2% year to date as of the close of trading on Monday.

You can view the full ConocoPhillips Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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