ConocoPhillips' Q1 Earnings on Deck: Remain Invested in the Stock?

ConocoPhillips COP is set to report first-quarter 2025 results on May 8, before the opening bell.

The Zacks Consensus Estimate for first-quarter earnings is pegged at $1.99 per share, implying a decline of 2% from the year-ago reported number. Two analysts revised the estimate upward in the past seven days. The Zacks Consensus Estimate for quarterly revenues is currently pegged at $16.4 billion, suggesting an improvement of 13.1% from the year-ago actuals.

COP beat the consensus estimate for earnings in three of the trailing four quarters and missed the same once, with the average surprise being 2.1%.

Q1 Earnings Whispers

Our proven model predicts an earnings beat for COP this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. That is the case here.

The leading upstream energy player has an Earnings ESP of 0.83%. COP currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Factors Shaping Q1 Results

According to the U.S. Energy Information Administration, the average spot prices for West Texas Intermediate (WTI) crude at Cushing, OK, were $75.74 per barrel in January, $71.53 per barrel in February and $68.24 per barrel in March. The favorable crude pricing environment in the first quarter is likely to have aided ConocoPhillips' exploration and production activities, potentially boosting the company’s production volumes.

Our model forecasts a 23% year-over-year increase in the company’s total daily oil equivalent production volumes. In the prolific Lower 48 region, which significantly contributes to COP’s production, daily oil equivalent volumes are expected to have risen 33.2% year over year, according to our model. Notably, the Lower 48 represents the company’s high-quality unconventional resources in the United States.

Price Performance & Valuation

COP's stock has lost 27% over the past year compared with the decline of 28% of the industry’s composite stocks.

One-Year Price Chart

With the price decline, it appears relatively undervalued. The company's current trailing 12-month enterprise value/earnings before interest, tax, depreciation and amortization (EV/EBITDA) ratio is 5.24, which is trading at a discount compared to the industry average of 10.76.

COP’s Investment Thesis

Late last year, ConocoPhillips completed the Marathon Oil acquisition. The integration has broadened ConocoPhillips' key Lower 48 portfolio while enabling it to expand its presence in prolific, low-cost U.S. basins such as Eagle Ford, Bakken, Delaware and Permian, adding more than 2 billion barrels of resources.

The leading upstream energy company has consistently prioritized acquisitions that support its long-term objective of enhancing stockholder value. With the completion of the deal, ConocoPhillips anticipates achieving annual savings exceeding $1 billion by integrating operations and expects the savings to be fully realized within the next 12 months. 

However, its exclusive focus on exploration and production makes it vulnerable to oil price volatility, posing greater challenges during downturns compared to diversified majors like Exxon Mobil Corporation XOM and Chevron Corporation CVX.

Also, COP’s overall upstream operations are highly capital-intensive, with the company aiming to invest more capital. Thus, its cash flows and revenue generation are significantly vulnerable to oil and gas prices. Since the uncertainty of energy demand, following ongoing trade tensions, is taking a toll on oil prices, COP’s bottom line could be hurt.

How the Diversified Energy Majors XOM, CVX Fared in Q1

Both ExxonMobil and Chevron reported better-than-expected first-quarter earnings. 

ExxonMobil reported first-quarter 2025 earnings per share of $1.76 (excluding identified items), which beat the Zacks Consensus Estimate of $1.74. The bottom line, however, declined from the year-ago level of $2.06. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.) 

ExxonMobil’s total quarterly revenues of $83.13 billion missed the Zacks Consensus Estimate of $84.15 billion. The top line, however, increased from the year-ago figure of $83.08 billion.

Better-than-expected quarterly earnings were fueled by higher production from Guyana, Permian and structural cost savings. However, this was partially offset by lower base volumes from divestments, a decline in industry refining margins and weaker crude price realization.

On the other hand, Chevron reported adjusted first-quarter earnings per share of $2.18, beating the Zacks Consensus Estimate of $2.15. The outperformance stemmed from higher-than-expected U.S. natural gas production in the company’s key upstream segment.

However, the bottom line of CVX came well below the year-ago adjusted profit of $2.93 due to weaker oil price realizations and a dip in refined product sales margins.

The company generated revenues of $47.6 billion. The sales figure missed the Zacks Consensus Estimate of $48.7 billion and decreased 2.3% year over year. For more details, read our blog: Natural Gas Lifts Chevron Q1 Earnings Amid Oil Weakness.

Last Word

While COP offers promising long-term potential and appealing valuations, investors should remain patient and monitor the resolution of ongoing uncertainties. Those already holding the stock are advised to maintain their position.

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This article originally published on Zacks Investment Research (zacks.com).

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