Replies to post #199 on Anadarko Petroleum Corporation (APC)

[OilStockReport]

APC to outperform the market? Thoughts?

Anadarko Petroleum Corporation (APC):

Trading at $69.88 price levels, APC offers an investment opportunity for long term investors. APC’s second quarter results were announced on July 25. The company reported a record liquid sales volume with high margins resulting in massive cash flows. The earning per share was recorded at $1.14 which was above market expectations. Quarterly revenue growth was 45.7% year over year which was higher than industry average growth of 15.5%. BP plc (BP), a direct competitor, reported revenue growth of 37.5%.

APC outperformed in gross margin and trailing twelve month stood at 80.02% against BP and industry average of 13.89% and 62.54% respectively. As far as operating margins are concerned, the industry average stood at -8.45% which is much lower than APC operating margin of 20.11%. Strong revenue growth and better margins justifies the high P/E of 41.50 times.

Given the company’s strong historical performance and future growth prospects we recommend a buy on the stock. Moreover, after the quarterly result announcement by APC, Goldman Sachs upgraded APC from neutral rating to buy with a target price of $100- a potential upside of 43% from current price level. In contrast, Barclays Capital cut their target price from $88 to $80.

[OilStockReport]

Separately, Anadarko Petroleum(APC) agreed to pay BP(BP) $4 billion to settle all claims from the Gulf of Mexico oil spill in April 2010, which Canaccord Genuity energy analysts say fully removes the overhang associated with the Macondo incident, and should redirect investor focus towards Anadarko’s “superior” deepwater exploration portfolio, strong liquidity, and improving U.S. onshore productivity.