ConocoPhillips Struggles to Dig Out of Pandemic-Fueled Hole

COP has more than doubled in less than 12 months

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ConocoPhillips (NASDAQ:COP) is an American multinational corporation engaged in hydrocarbon exploration. The Houston-based company has approximately 10,300 employees and operates in 15 countries including the United States, Norway, Canada, Australia, Indonesia, Malaysia, Libya, China, and Qatar. This morning, COP is down 1.7% at $55.53.

ConocoPhillips stock has increased in price by about 48% year-over-year and has added 101% since bottoming at a annual low of $27.53 at the end of October. Additionally, shares of COP have grown by 43% year-to-date. However, ConocoPhillips stock is down 13% since reaching a 52-week high of $63.57 at the end of June. Moreover, ConocoPhillips offers a forward dividend of $1.72 and a dividend yield of 3.04%.

COP has outperformed earnings estimates on three of its last four earnings reports. For Q3 of fiscal 2020, ConocoPhillips missed analyst estimates by a margin of $0.34 and reported an EPS of -$0.92. For Q4 of fiscal 2020, COP reported an increased EPS of -$0.31 and beat estimates by a margin of $0.01. For Q1 of fiscal 2021, ConocoPhillips' earnings increased to -$0.19 per share and beat estimates by a $0.09 margin. For Q2 of fiscal 2021, COP reported an EPS of $0.69 and beat expectations by a margin of $0.18.

From a fundamental perspective, ConocoPhillips has struggled to find consistency over the past few years. Aside from experiencing a 42% revenue decline in fiscal 2020, as a result of the pandemic, COP also posted an 11% revenue decline in fiscal 2019.

Overall, ConocoPhillips stock has strong potential as a recovery play. Although COP currently trades at a high price-earnings ratio of 36.81, ConocoPhillips stock has a very attractive forward price-earnings ratio of 12.35. If analyst estimates are accurate, this could signal a massive improvement for ConocoPhillips stock.

Meanwhile, the options pits are extremely optimistic, with calls ruling the roost. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 4.04 sits higher than 82% of readings from the past year. In other words, calls are being picked up at a faster-than-usual clip.

Now looks to be a good time to bet on the equity's next moves with options. This is per ConocoPhillips stock's Schaeffer's Volatility Index (SVI) of 31%, which sits in the low 4th percentile of its annual range. In simpler terms, options players are pricing in relatively low volatility expectations at the moment.
 

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