In the lead up to ConocoPhillips' (NYSE:COP) announcement of its third quarter earnings on Thursday, October 25, 2012, analysts' expectations have improved over the past month from $1.12 per share to the current projection of earnings of $1.17 per share.
Earnings play an important role in measuring the appropriate valuation for a stock. Investors should be cautious if the company's stock price is high but it consistently has low earnings. SEE: Can Earnings Guidance Accurately Predict The Future?
What to Expect: In the last 90 days, this has risen from $1.16. For the fiscal year, analysts are expecting earnings of $5.64 per share.
Revenue for the quarter is expected to be $11.11 billion, short of last year's reported figure of $62.81 billion by 82.3%. Revenue of $96.13 billion is expected for the fiscal year.
Company Performance: ConocoPhillips reported a decline in revenue in the second quarter, ending a three-quarter growth streak. After rising 1.1%in the first quarter, 19.2% in the fourth quarter of the last fiscal year and 33.1% in the third quarter of the last fiscal year, it fell 76.9% in the most recent quarter.
Relative to the industry P/E ratio of 10.66, COP's 6.7 is low. Companies with low P/E ratios may find it easier to surprise the market to the upside, even if their financial performance is not as strong as that of companies with high P/E ratios. The price/earnings ratio is calculated by taking a stock price and dividing it by the earnings-per-share (EPS). High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: How To Use The P/E Ratio And PEG To Tell The Future Of A Stock
Over the past quarter, the stock price has increased from $54.64 on July 24, 2012 to $57.45. ConocoPhillips' best recent streak was when its price gained $2.10 per share between October 12, 2012 and October 18, 2012.
The Competition: An international energy company, ConocoPhillips operates under six segments: exploration and production, midstream, refining and marketing, LUKOIL investment, chemicals, and emerging businesses. Opinion about the stock has worsened recently, as buy ratings have dropped slightly over the last three months.
The company's closest competitor in the oil and gas operations industry is China Petroleum & Chemical (SNP). Analysts are less optimistic about ConocoPhillips than about China Petroleum & Chemical. Two out of three analysts rate the latter a buy compared to six of 15 for the former.