UBS’ Best Stocks In The AI, Growth & Low Rates Era: Top 29 US Stocks

23. ConocoPhillips (NYSE:COP)

Number of Hedge Fund Investors In Q2 2024: 72

UBS’ Sector Rating: Neutral

Sector: Energy

ConocoPhillips (NYSE:COP) is a sizable American oil and gas company with a solid presence in the shale oil industry. As a result, while Suncor’s stock has rallied this year due to tailwinds from its turnaround successes, ConocoPhillips’ (NYSE:COP) stock has suffered. Oil prices have fluctuated throughout 2024 on the back of a weakening Chinese economy and conflict in the Middle East. For instance, ConocoPhillips’ (NYSE:COP) stock dropped by 3.7% at the start of September after OPEC production grew and Chinese demand slowed. This pushed crude oil prices below $75 and WTI below $71. However, ConocoPhillips’ (NYSE:COP) scale, as evidenced by cash and equivalents of $6 billion has allowed it to keep up with the wave of acquisitions that took the US oil industry by storm last year. The firm aims to acquire Marathon Petroleum for a whopping $22.5 billion price tag, and it is anticipated that the deal will bump ConocoPhillips’ (NYSE:COP) free cash flow per share by 11%. Consequently, any miss related to the deal’s outcome could create headwinds for the stock.

ConocoPhillips’ (NYSE:COP) management commented on the deal during the Q2 2024 earnings call:

“Now regarding our planned acquisition of Marathon Oil, we remain very excited about this transaction and integration planning activities are underway to ensure a seamless transition upon close.

The Marathon Oil shareholder vote has been set for August 29, and we are working through the FTC’s second request that we received in mid-July. We still expect to close the transaction late in the fourth quarter. On return of capital, we remain committed to distributing at least $9 billion to shareholders this year on a stand-alone basis. As we said back in May, we will be incorporating our VROC into our base dividend starting in the fourth quarter, representing a 34% increase in the ordinary dividend. And consistent with our long-term track record, we are confident that we can grow this dividend at a top quartile rate relative to the S&P 500. Finally, as we previously announced with the Marathon acquisition, we will be increasing our annualized buyback run rate by $2 billion upon closing with a plan to retire the equivalent amount of newly issued equity in 2 to 3 years.”