RBC Capital Markets has lifted its earnings forecasts for BP for 2026 through 2028, following a meeting with the company's chief financial officer, Kate Thomson. The bank's analysts argue that BP's refining business can continue to generate strong profits into 2027, even if oil prices remain volatile.
The upgrade comes as BP, one of the world's largest energy companies, works to balance its traditional oil and gas operations with a push into lower-carbon energy. Refining—the process of turning crude oil into products like gasoline, diesel, and jet fuel—has been a bright spot for many oil majors in recent years, as global demand for refined products has stayed resilient.
What the bank is saying
RBC's analysts raised their earnings per share (EPS) estimates for BP for the 2026-2028 period. EPS is a key measure of a company's profitability, calculated by dividing net income by the number of shares outstanding. Higher EPS forecasts typically signal that analysts expect the company to earn more money per share in the future.
The bank also flagged that BP is on track to deliver $5.8 billion in structural cost savings by the end of 2027. Structural cost savings refer to permanent reductions in the company's cost base—such as streamlining operations, cutting overhead, or improving efficiency—rather than temporary measures like layoffs or one-off budget cuts. These savings can boost profitability even if revenue stays flat.
RBC's positive view on BP's refining business suggests that the company is well-positioned to benefit from strong margins in the sector. Refining margins—the difference between the cost of crude oil and the price of refined products—have been elevated in recent years due to a combination of tight supply and steady demand. Even if oil prices swing up and down, refining profits can remain healthy as long as those margins hold up.
Why this matters for investors
For everyday investors, this news is a signal that at least one major bank sees BP's earnings power as stronger than previously expected. When analysts raise their forecasts, it can lead to higher price targets and more positive sentiment around the stock, which may support the share price over time.
However, it's important to remember that analyst forecasts are just one piece of the puzzle. BP's actual results will depend on a range of factors, including global oil prices, refining margins, operational performance, and the success of its cost-saving initiatives. The company also faces long-term questions about the transition away from fossil fuels, which could affect its valuation and growth prospects.
Investors should also note that RBC's upgrade is based on a meeting with the CFO, which suggests the bank has gained confidence from management's guidance. But such meetings are not guarantees of future performance—they are simply one analyst's interpretation of the company's outlook.
Broader market context
The upgrade comes at a time when energy markets are facing uncertainty. Oil prices have been choppy, influenced by factors such as global demand, production decisions by major exporters, and geopolitical tensions. Meanwhile, strong jobs data has raised the possibility of further interest rate hikes, which can affect the broader economy and energy demand.
For BP, the refining business is a key profit driver, and the company has been investing in its downstream operations to capture more value from its crude oil. The $5.8 billion cost-saving target is part of a broader efficiency drive that BP has been pursuing to improve its financial performance.
Investors will be watching BP's upcoming earnings reports to see if the company can deliver on these expectations. The market will also be looking at how BP manages its capital spending, dividends, and share buybacks, which are important for shareholder returns.
What to watch next
Beyond BP's own results, investors should keep an eye on global refining capacity and demand trends. If refining margins remain strong, BP and other oil majors could continue to generate robust cash flows. On the other hand, any significant slowdown in global economic growth could weigh on demand for refined products.
RBC's upgrade is a positive signal, but it's not a reason to make hasty investment decisions. As always, it's wise to consider your own financial goals and risk tolerance before acting on any analyst recommendation.
