Can Recent Headlines Help Boost BP’s Stock?

With shares of BP (NYSE:BP) trading around $45, is BP an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

BP is an integrated oil and gas company. The firm provides its customers with fuel for transportation, energy for heat and light, lubricants, and the petrochemicals products used to make items like paints, clothes, and packaging. It operates in two business segments: exploration and production, and refining and marketing. BP provides energy products to consumers and companies worldwide. Without the oil and gas products provided, many consumers and businesses would not be able to operate on a daily basis.

BP has signed a deal with a group of oil companies to pump gas via a pipeline from a field in Azerbaijan to Italy, giving the European Union an alternative to Russia as a source of pipeline oil, Bloomberg reports. This comes after arguments about gas pricing between Russia and Ukraine made European leaders worry about disrupting shipments of oil, as several major pipelines run through those two countries. The Shah Deniz field in Azerbaijan will be expanded to increase production by 16 billion cubic meters a year, according to BP. The project involves drilling in the Caspian Sea and building pipelines through Turkey leading into Greece, Albania, and Italy. Oil from the Shah Deniz field will reduce the EU’s dependence on oil from Russian monopoly OAO Gazprom, which currently transports a quarter of the EU’s oil that comes via pipeline, according to Bloomberg.

T = Technicals on the Stock Chart Are Mixed

BP stock has not made significant progress in recent years. The stock is currently pulling back and may need time to stabilize before heading higher. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, BP is trading above its rising key averages, which signal neutral to bullish price action in the near-term.


(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of BP options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

BP options




What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

January Options



February Options



As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on BP’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for BP look like and more importantly, how did the markets like these numbers?

2013 Q3

2013 Q2

2013 Q1

2012 Q4

Earnings Growth (Y-O-Y)





Revenue Growth (Y-O-Y)





Earnings Reaction





BP has seen decreasing earnings and mixed revenue figures over the last four quarters. From these numbers, the markets have had conflicting feelings about BP’s recent earnings announcements.

P = Average Relative Performance Versus Peers and Sector

How has BP stock done relative to its peers, Chevron (NYSE:CVX), Exxon Mobil (NYSE:XOM), Royal Dutch Shell (NYSE:RDSA), and sector?



Exxon Mobil

Royal Dutch Shell


Year-to-Date Return






BP has been an average relative performer, year-to-date.


BP is an oil and gas company that supplies energy products and services worldwide. The company as signed a deal with a group of oil companies to pump gas via a pipeline from a field in Azerbaijan to Italy. The stock has not made significant progress in recent years and is currently pulling back. Over the last four quarters, earnings have been decreasing while revenues have been mixed, which has left investors with mixed feelings about recent earnings announcements. Relative to its weak peers and sector, BP has been an average year-to-date performer. WAIT AND SEE what BP does this quarter.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.