- BP
- 12 May 2025 16:12:56
Source: Sharecast
The Wall Street bank argued that the sector’s fortunes "remain closely tied to oil markets, which we expect to enter a meaningful surplus after the summer.
"We foresee downside risk to earnings and buybacks, upside risk to net debt and do not find valuations compelling."
Shell remains the sector's top pick, followed by TotalEnergies, which Morgan Stanley upgraded to ‘overweight’ from ‘equal weight’.
But BP was trimmed to ‘underweight’ from ‘equal weight’.
Morgan Stanley said: "BP laid out an ambitious plan with major cost savings, capex cuts, disposal plans and a shift back to oil and gas.
"However, that was only part of the issue. More confidence on earnings delivery and an improved balance sheet takes time, and is contingent on execution of the current plan, which is a more difficult task to deliver amid lower oil prices."
It concluded: "We see a combination of elevated gearings versus peers; larger downside risk to consensus expectations than peers; and a premium valuation.
"Altogether that does not screen as particularly compelling to us in the context of lower oil prices and a preference for defensive stores, and we downgrade the stock."
Elsewhere, Jefferies started coverage of flexible office space provider IWG with a ‘buy’ rating and 240p price target as it argued that momentum was building and said it was "time to flex".
"The group is moving through an inflection point in growth for its Managed & Franchise assets, we forecast circa 40% divisional EBITDA CAGR to FY27e, while also accelerating the transition to a capital-light model," the bank said.
It also said that improving free cash flow can drive more than $400m of potential excess cash to be returned to shareholders over FY25-27, which alongside consistent delivery can drive a re-rating in IWG shares.
