ii view: TotalEnergies beats forecasts and boosts dividend
Offering a European alternative to Shell and BP and offering an attractive dividend yield. Buy, sell or hold?
5th February 2025 15:45
by Keith Bowman from interactive investor
Fourth-quarter results to 31 December
- Adjusted net income down 15% to $4.4 billion
- Q4 dividend payment of €0.85
- Total 2024 dividend payment up 7% to €3.22 per share
- Total 2024 share buyback of $8 billion
- Gearing of 8.3%, down from 12.9% at the end of Q3
Guidance:
- Expects to buy back around $8 billion of shares in 2025
Chief executive Patrick Pouyanné said:
“TotalEnergies continued to implement its balanced growth strategy in a disciplined manner, investing $17.8 billion in 2024, of which one third was in new Oil & Gas projects and $4.8 billion in low-carbon energies.”
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ii round-up:
TotalEnergies SE (EURONEXT:TTE) today outlined profits marginally higher than City forecasts, with the French oil major also increasing its total dividend payment for 2024.
Reduced refining margins left fourth-quarter profit down 15% year-over-year at $4.4 billion, ahead of analyst forecasts of around $4.2 billion, and helped by a better-than-expected trading performance for Liquefied Natural Gas (LNG). A quarterly dividend of €0.85 per share leaves the annual payment up 7% at €3.22 per share.
Shares in France’s sixth-largest company by stock market value rose 2% in European trading having come into this latest news down 14% in 2024. That’s similar to rival BP (LSE:BP.) and worse than a 4% retreat for Shell (LSE:SHEL). Political uncertainty was largely behind a 2% drop in the French CAC 40 index in 2024.
Total operates in around 120 countries and is a major player in the LNG marketplace, with new projects for the fuel started in Oman and Nigeria, and further assets acquired in Malaysia during 2024.
The oil major expects production for the year ahead to grow by around 3%, driven by 2024 project start-ups in Brazil, the USA, Argentina and Denmark.
Expected capital expenditure of $17 billion in 2025 is down from October’s estimate of $18 billion. Year-end gearing, or borrowings as a percentage of equity fell to 8.3% from 12.9% at the end of the third quarter.
Broker UBS reiterated its ‘buy’ stance on the shares post the results.
ii view:
Founded in 1924, the company changed its name to TotalEnergies from Total in 2021. Operations include Exploration & Production, Integrated Gas, Renewables & Power - including solar and offshore wind - as well as Refining & Chemicals. Over 14,600 service stations include more than 60,000 electric vehicle charging points.
For investors, trade tariffs introduced by Donald Trump risk a global trade war, potentially hindering economic growth and harming demand for energy. The volatility of energy prices in recent years from the lows of the pandemic to highs following Russia’s invasion of Ukraine should not be forgotten. Tackling climate change remains a pressing issue for both the industry and governments globally, while the pricing of Total’s shares in euros also adds the additional risk of currency movements for UK investors.
More favourably, both business type and geographical diversity are enjoyed, with strong cashflows allowing a combination of investment, debt reduction, and shareholder returns to be made. Net debt of $6.3 billion is comfortably below the $38.5 billion recently reported by rival Shell, while a forecast dividend yield of over 5.5% remains attractive.
On balance, and despite continued risks, a consensus analyst estimate of fair value close to €70 per share looks to put Total in the mix for UK investors seeking an alternative to the established domestic majors.
Positives:
- Geographical diversity of operations
- Attractive dividend payment (not guaranteed)
Negatives:
- Uncertain economic outlook
- Currency risks
The average rating of stock market analysts:
Buy
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