Berenberg ups BP target but sees greater upside elsewhere

Berenberg has lifted its target price for oil titan BP after this week's third-quarter results, but kept a 'hold' rating, saying it sees more attractive investments elsewhere in the sector.

BP delivered a set of weak results for the quarter ended 30 September, Berenberg said, "with the main surprise being a poor trading result in Gas & Low Carbon Energy after two very strong quarters through H1".

Adjusted net income came in at $3.29bn, 18% below consensus estimates of $4.01bn and below the $8.15bn reported a year earlier which benefitted from a favourable accounting adjustment.

However, operating cash flow was strong at $8.75bn, up from $8.29bn, while net debt fell to $22.3bn from $23.7bn three months earlier.

"Cash flow was helped by working capital in the quarter, but management retains its focus on improving the balance sheet and credit rating, which could put some downward pressure on shareholder returns if the environment moderates into 2024," the broker said.

Berenberg has cut its earnings forecasts for 2023 by 7% due to the weak result in the Gas division, but has lifted its estimates for the next two years by 4% and 7%, respectively, due to stronger expected oil and downstream results.

As such, the target price for the shares has been lifted from 490p to 525p.

"Valuation remains attractive on our estimates, but we remain below consensus and see greater upside elsewhere in the sector, so we remain at 'hold'."