ConocoPhillips (COP.US) pre-performance, Morgan Stanley maintains a "buy" rating: Q3 performance expected to be robust, but cash flow performance may fall short of expectations.

ConocoPhillips (COP.US) will announce its third quarter performance for 2025 before the US stock market opens on November 6th East Coast time. Morgan Stanley analyst Devin McDermott has lowered the stock's target price from $123 to $122, while maintaining a "hold" rating. Morgan Stanley expects the company to deliver steady third quarter operating data, but also points out that due to weakening actual selling prices of natural gas and liquefied natural gas, the company's cash flow performance may be lower than the market's general expectations. ConocoPhillips has completed the integration of Marathon Oil Corporation and is expected to achieve over $1 billion in synergies and over $1 billion in one-time profits. The company is striving to achieve over $1 billion in cost reduction and efficiency improvement across the entire company by the end of 2026 through its scale advantage and technological strength. These measures will effectively enhance the company's ability to generate free cash flow. In another announcement, ConocoPhillips announced that it has signed a long-term purchase and sale agreement with U.S. Energy Corp. company NextDecade to purchase 1 million tons of liquefied natural gas annually from the Rio Grande natural gas project near Brownsville, Texas. Asset management company Cullen Capital Management previously stated in an investor letter that as a leading independent exploration and production company, ConocoPhillips has a global portfolio of low-cost, high-return assets and adheres to a strict capital allocation strategy. With capital expenditures on large, long-term projects expected to gradually decrease starting in the second half of 2025, the company is reaching a turning point in free cash flow, which will boost its shareholder return capability. Management plans to return approximately 45% of operating cash flow through dividends and share buybacks, a target supported by efficiency improvements and a solid balance sheet. Based on expected earnings per share in 2025, ConocoPhillips currently has a P/E ratio of 14.4 and a capital return rate of around 8%. In the context of a positive long-term outlook for crude oil, this presents an attractive buying opportunity.