Stock of the day 29/10/2015 – BG Group

With both BP and (soon to be owner?) Shell posting third quarter results in varying shades of disastrous, how will BG Group fare on Friday when its reveals its own Q3 2015 figures?

Since the announcement of the (potential, at least at this point) BG/Shell merger inflated the former’s price from £8.69 to £13 in the space of 24 hours back at the start of April, the stock has spent the intervening months between then and now largely on a downward trajectory. After floating around the £12 mark for most of the first month following the deal-reveal, BG’s fiscal first quarter results back at the start of May brought the company back down to earth.


(Source: IT-Finance.com 29/10/2015)

A 41% fall in core earnings to $1.59 billion alongside a $1.2 billion drop in pre-tax profits to $708 million provided a start reminder to investors that, regardless of a takeover by Shell, BG still has to deal with the harsh landscape of the commodity sector. These Q1 figures didn’t spark any dramatic drop for the company, but did reduce investors’ appetite for the stock; combine that with the ever-volatile oil prices and BG gradually fell from £12 on the eve of its May report to £10.28 ahead of its second quarter results at the end of July.

The day before those Q2 figures BG received a much needed boost in the form of an update from Shell which stated that the takeover was ‘progress[ing] well’. This pushed BG higher by nearly 4%, with those comments from its soon-to-be parent helping the company overcome a set of second quarter results the following day which saw a (somehow better than expected) 65% plunge in net income to $429 million.

Yet just as BG began to creep above the £11 mark the market-chaos of August began, dragging the stock all the way back down to £9.12, only marginally higher than its pre-takeover announcement price. Bouncing between £9 and £10 for the next 6 weeks, BG only managed to break out of that trading band at the start of October, flirting with hitting £11 for most of the month.

However, the double whammy hit of weak BP and Shell earnings has dragged the stock down this week, leaving BG Group at a current trading price of £10.34 (IT-Finance.com, 29/10/2015). And if analysts are correct BG could be in for its own awful set of figures, with forecasts pointing to a heart-stopping 82% drop in profits to $230 million.

BG Group has a consensus rating of ‘Buy’ with an average target price of £11.77.