BP Share Price Forecast: At Risk Ahead of Q1 Earnings

The BP share nosedived by over 6% on Monday as crude oil, and natural gas prices slumped. The stock crashed to a low of 368p, which was the lowest level since March 29th. It has dropped by more than 9.40% from its highest level this month. Other oil and gas stocks like Tullow Oil, Shell, and ExxonMobil also slipped sharply. 

BP earnings preview

The strong bullish trend that happened in the first quarter of the year has started fading in the past few weeks. This performance is mostly because the crude oil price has declined sharply from their highest level this year. Brent, the international benchmark, has dropped from over $130 in February to $103, while West Texas Intermediate (WTI) has retreated to about $99. Therefore, analysts expect that BPs revenue will be smaller than expected. 

The BP share price has also declined because of the company’s exit from Russia by ending its relationship with Rosneft. While the ethics part of this exit was reasonable, investors expect a large impairment charge for the company. 

Therefore, next week will be important for the firm as it is set to publish its quarterly results and dividend announcement. In the fourth quarter, the company made a profit of $2.3 billion and an operating cash flow of over $6.1 billion. Its Return on Average Capital Employed (ROACE) for the year was 13.3%, which was an attractive reading. Analysts expect that BP’s revenue rose to more than $53.20 billion in Q1 from $50.5 billion in Q4. They also expect that its EPS rose to $1.38.

In addition to being cheaply valued, analysts expect that BP’s dividend payouts will continue this year. The company has a dividend yield of 4.34% and a forward yield of 4.39%. It has a payout ratio of 5.65%, which is quite reasonable. 

BP share price forecast 

The daily chart shows that the BP stock price has been in an overall bullish trend in the past few months. The stock remains above the ascending trendline that is shown in orange. It has also moved slightly below the 25-day and 50-day moving averages (MA), while the Stochastic Oscillator has moved close to the oversold level. A closer look shows that it has formed what looks like a head and shoulders pattern. 

Therefore, while BP shares offer value, there is a likelihood that they will have a bearish breakdown before or after the quarterly results. If this happens, the next key support level to watch will be at 342p. It must move below the ascending trendline for this to happen.