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TotalEnergies, Equinor Tipped for Strong Q3 Earnings by TD Cowen
Summary
TD Cowen analysts have highlighted their top integrated oil picks ahead of earnings season, citing a rising commodity environment that consensus estimates have yet to fully capture. The firm expects the sector to generate $100 billion in excess cash through late 2027.
Analysts at TD Cowen have identified leading integrated oil companies poised for strong third-quarter results, naming TotalEnergies as their top pick. The firm's estimates for the sector are approximately 20% above consensus for both earnings per share and free cash flow, reflecting a rising commodity environment that analysts believe has not been fully priced in by the market.
Sector-Wide Cash Generation
According to a note from TD Cowen analyst Jason Gabelman, the peer group is projected to generate $100 billion in excess cash from the third quarter of 2026 through the fourth quarter of 2027 at current strip prices. This cash is being generated above and beyond forecast distributions and target debt levels.
The firm observed that major oil companies are currently prioritizing strengthening their balance sheets with this excess cash rather than increasing shareholder distributions. This cautious approach signals a response to elevated macroeconomic uncertainty, particularly following recent developments in the Middle East, the note stated.
Top Analyst Picks
TD Cowen detailed several companies with a favorable outlook heading into the earnings reporting period.
TotalEnergies (TTE)
AdTotalEnergies remains the firm's top selection, with its performance expected to be bolstered by its recent Investor Day. TD Cowen incorporated a $0.35 per share trading outperformance for the company and noted it is among the most likely to increase its share buyback program in the near term, given its payout targets.
Equinor (EQNR)
Equinor is favored due to a combination of strong natural gas prices and a lag in cash tax payments, which is expected to result in exceptionally strong cash flows. The company is forecast to beat consensus earnings per share by the widest margin in the group and could reduce its net debt to capital by more than 5% quarter-over-quarter.
ExxonMobil (XOM)
The note also suggested a potential rotation by investors out of Chevron (CVX) and into ExxonMobil. While Chevron has recently outperformed on news related to Venezuela, TD Cowen believes potential questions around its TCO extension could prompt a shift back to Exxon. The firm's model includes a $1.50 per share timing headwind for Chevron.
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