Equinor Outperforms & Trades at a Premium: Should You Buy the Stock?

Globe and Mail

a day ago

Shares of Equinor ASA EQNR have gained 12.5% in the past six months, outperforming the oil-energy sector and the Zacks S&P 500 composite's declines of 5.5% and 0.5%, respectively. The company has a market capitalization of $70.4 billion.
Positive Outlook on Equinor's Growth Trajectory
The Zacks Consensus Estimate for EQNR's 2025 revenues is pegged at $106.4 billion, implying a year-over-year improvement of 2.54%.
Equinor's earnings grew 20.6% in the last five years, better than the industry average of 4.4%.
Long-term earnings growth is expected to be 12.1%, better than the industry average of 10.1%. EQNR has an impressive Growth Score of A. This style score helps analyze the growth prospects of a company.
Average Target Price for EQNR Suggests Upside
Based on short-term price targets offered by six analysts, the Zacks average price target is $25.66 per share. The average suggests a 3.9% upside from the last closing price.
Favorable Return on Capital
Return on equity in the trailing 12 months was 18.44%, better than the industry average of 14.14%. This highlights the company's efficiency in utilizing shareholders' funds.
Also, the return on capital (ROC) has been increasing over the last few quarters as the company raised its capital investment over the same time frame, reflecting EQNR's efficiency in utilizing funds to generate income. ROC in the trailing 12 months was 10.9%, better than the industry average of 9.27%.
EQNR Shares Trade at a Premium
Equinor shares are trading at a premium to the industry. Its price-to-book value of 1.54X is higher than the industry average of 1.35X. Shares of other integrated energy companies like Cenovus Corporation CVX and Exxon Mobil Corporation XOM are trading at a multiple higher than the industry average, while Shell plc SHEL is trading at a discount.
Factors to Consider
Equinor, a leading integrated energy giant, has a presence in more than 30 countries globally. Within Europe, it serves as the second-largest natural gas provider. In the first quarter of 2025, this energy giant completed five exploration wells in the Norwegian Continental Shelf, along with two commercial discoveries. Equinor expects 4% year-over-year growth in oil and gas production for 2025.
EQNR has demonstrated a robust financial performance in the first quarter of 2025, with an adjusted operating income of $8.6 billion and a net income of $2.6 billion. The cash flow from operations after tax was $7.4 billion, supported by higher gas prices in Europe and the United States. Notably, the company maintains a strong liquidity position, with $24.8 billion in cash and equivalents, and a lower net debt-to-capital-employed ratio of 6.9%.
Despite market headwinds, Equinor reiterated its $9-billion capital distribution target for 2025, including dividends and share buybacks. The company highlighted the Norwegian tax regime's protective nature, covering 78% of downside price risks through tax deductions. Furthermore, with project breakeven costs below $40 per barrel and a total delivered gas cost to Europe of just $2 (compared with the current market price of $11), there is a substantial margin to preserve shareholder returns even in a weaker commodity environment.
From September 2025, Equinor will launch a dedicated power business area, consolidating assets from renewables and trading operations. This initiative aligns with a broader strategy to capture synergies in gas-to-power dynamics and streamline oversight of power market activities, particularly relevant as power systems increasingly integrate low-carbon and flexible sources.
Although organic for now, this consolidation may serve as a foundation for future scale in dispatchable power or grid-adjacent services.
Conclusion
Equinor presents an attractive investment opportunity due to its strong operational efficiency, consistent financial performance and forward-looking strategic initiatives. The company has demonstrated its ability to generate shareholder value through disciplined capital management and a resilient business model that thrives even amid market volatility. With a solid position in the global energy market and an increasing focus on transitioning to low-carbon solutions, Equinor is well-positioned for sustainable long-term growth.
However, EQNR's first-quarter 2025 results were negatively impacted by a major setback in its Empire Wind project, which was halted on April 16 by a U.S. Bureau of Ocean Energy Management stop-work order. Equinor disputes the legality of the order, asserting that all permits were properly secured after extensive regulatory review. With the project already 30% complete and a book value of $2.5 billion, the suspension exposes Equinor to up to $2 billion in risk, posing serious financial and strategic risks to its U.S. renewable energy ambitions.
Hence, with a premium valuation, it is better to stay cautious about this Zacks Rank #3 (Hold) stock. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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