How Is Eni Restructuring Its Business Model?
Eni’s analyst ratings
Eni’s (E) analyst ratings show that 33% of the surveyed analysts covering the stock rate it as a “buy.” The highest 12-month price target for Eni stands at $39, indicating a 33% rise from its current level. Of the surveyed analysts, 67% rate it as a “hold.” There are no “sell” ratings for Eni.
Eni’s peers Cenovus Energy (CVE), YPF (YPF), and Statoil (STO) have been rated as “buys” by 42%, 91%, and 50% of analysts, respectively. For exposure to large-cap energy stocks, you can consider the PowerShares Dynamic Large Cap Value ETF (PWV), which has ~11% exposure to energy sector stocks.
Let’s quickly analyze Eni’s 4Q15 results. A company’s latest quarterly results play an important role in analysts’ ratings.
Eni’s 4Q15 earnings review
In response to lower oil prices, Eni is undertaking a restructuring exercise, as discussed earlier in the series. However, the impact of lower oil prices was visible in its fourth-quarter results. In 4Q15, Eni posted a net loss 8.5 billion euros, of which 6.9 billion euros were from continuing operations. Eni reported EPS (earnings per share) of -2.4 euros, of which EPS of -1.9 euros were from continuing operations in 4Q15.
After the adjustment of Eni’s net earnings from continuing operations for special items, inventory holding gains and losses, and transaction effects of discontinued operations, Eni’s net earnings stood at -200 million euros. Special items include impairments, gains or losses on foreign exchange rate differences and derivatives, gains or losses on asset disposal, risk provisions, commodity derivatives, and environmental charges.
The largest of all Eni’s expenses was the impairment charge of 6.4 billion euros in 4Q15, the main portion of which was in Eni’s Exploration & Production (or E&P) segment.
Moving on to operating earnings, Eni posted an adjusted operating profit of 857 million euros in 4Q15 compared to 2,358 million euros in 4Q14. The steep fall in adjusted operating earnings was due to a sharp fall in earnings of the company’s E&P segment. The Gas & Power and Refining & Marketing segments also saw falls in their adjusted operating earnings.
In the next part, we’ll drill down further into segment-level dynamics within Eni.
Browse this series on Market Realist: