Why BP Is One of the Best Oil Stocks to Buy Right Now

With oil prices surging again, BP BP) is emerging as one of the more compelling large-cap energy stocks to consider.

Brent crude climbed back above $100 per barrel on Wednesday, creating another powerful cash-flow tailwind for integrated oil producers.

That is particularly attractive for BP, considering the company was already generating immense amounts of cash before crude's latest move higher.

Along with strengthening fundamentals and an improving earnings outlook, investors are getting a dividend yield of more than 4.5% and a stock that still trades at a very reasonable valuation.

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BP's Immense Cash Flow

Last month, BP's second-quarter results showcased just how much cash the company can generate in a favorable energy environment.

Operating cash flow surged 73% year over year to $10.86 billion in Q2, compared with $6.27 billion in the prior-year period. Underlying replacement cost profit more than doubled to $5.73 billion, aided by higher energy prices, stronger refining margins, and trading results.

Importantly, this cash generation is strengthening BP's balance sheet as well. Net debt fell to $22.25 billion, compared with $26.04 billion a year earlier. At the end of Q2, BP had over $45 billion in cash and equivalents and more than $294 billion in total assets, which is nicely above its total liabilities of $218.2 billion.

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Investors are also being rewarded directly, with BP raising its quarterly dividend by more than 4% to $0.52 per share. With Brent now above $100, BP's already impressive cash-flow profile could receive another boost if elevated oil prices persist.

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BP's Growth Outlook & Soaring EPS Revisions

BP still has several avenues to expand earnings and cash flow beyond simply relying on higher commodity prices.

The company has been ramping up a wave of major upstream developments, with eight of 10 major projects scheduled between 2025 and 2027 already online as of July.

BP has also targeted adjusted free-cash-flow growth of more than 20% annually from 2024 through 2027, along with return on average capital employed (ROACE) above 16% in 2027.

Near-term earnings expectations are particularly strong. The Zacks Consensus currently calls for 2026 EPS of $6.45, representing growth of more than 123%, while revenue is projected to rise roughly 21% to $232.88 billion.

Although FY27 EPS is projected to normalize to $4.95 following an exceptional FY26, earnings estimates have climbed sharply over the last 60 days, with the FY27 EPS consensus rising nearly 25% (F2 below) and FY26 EPS estimates jumping almost 30% (F1).

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BP's Attractive Valuation

Despite its rising earnings outlook and robust cash generation, BP stock remains relatively inexpensive even after a 30% year-to-date surge toward 52-week highs.

Trading at around $45 a share, BP stock is at a 7X forward earnings multiple. This is still a notable discount to oil giants Chevron CVX) and Exxon Mobil XOM), which trade at roughly 12X forward earnings, respectively.

BP's price-to-cash-flow ratio of 4X also sits well below many of its large-cap oil peers, with Chevron and Exxon both trading at around 12X cash flow.

That combination of a low earnings multiple, massive cash flows, and a dividend yield above 4.5% makes BP particularly appealing for investors looking for both value and income exposure to elevated oil prices.

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Bottom Line

Of course, a sharp reversal in crude prices would temper BP's earnings and cash-flow outlook. Still, the current setup is difficult to overlook, with Brent above $100, BP producing billions of dollars in quarterly cash flow, reducing debt, growing its dividend, and advancing several major upstream projects.

At the moment, BP stock currently sports a Zacks Rank #1 (Strong Buy) and has an overall "A" VGM Zacks Style Scores grade for the combination of Value, Growth, and Momentum.

For investors seeking exposure to high oil prices without paying a premium valuation, BP looks like one of the best stocks to consider right now.

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This article originally published on Zacks Investment Research (zacks.com).

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