Q2 in the Rearview: Is COP a Smart Hold Stock or a Hot Chase?

Core Viewpoint - ConocoPhillips (COP) reported second-quarter 2025 earnings that exceeded expectations, driven by higher oil-equivalent production volumes, particularly from the Lower 48, indicating a strong business outlook [1]. Group 1: Earnings Performance - ConocoPhillips reported adjusted earnings per share of $1.42, surpassing the Zacks Consensus Estimate of $1.36, although it decreased from the prior year's level of $1.98 [2]. - Quarterly revenues reached $14.74 billion, an increase from $14.14 billion in the same period last year, but fell short of the Zacks Consensus Estimate of $14.93 billion [3]. Group 2: Acquisition and Integration - The acquisition of Marathon Oil has bolstered ConocoPhillips' upstream presence in the Lower 48, enhancing scale, production capacity, and operational efficiencies [5]. - Following the integration of Marathon Oil, ConocoPhillips has revised its resource estimate upward to 2.5 billion barrels, a 25% increase from the previous estimate of 2 billion barrels [7]. Group 3: Cost Savings and Efficiency - ConocoPhillips anticipates achieving over $1 billion in annual savings from Marathon-related efficiencies by the end of 2025, up from an initial estimate of $500 million [8]. - Additional cost savings of $1 billion per year are expected from reduced administrative costs, lower field operating expenses, and improved commercial margins, targeting a total of $2 billion in annual savings by the end of 2026 [9]. Group 4: Market Position and Valuation - Despite positive developments, ConocoPhillips' stock has declined 11.6% over the past year, outperforming the 19.9% decline of the industry's composite stocks [13]. - The stock is currently undervalued, trading at a 5.27x trailing 12-month EV/EBITDA, compared to the broader industry average of 9.03x [14].