The head of analysis believes the fund sell-off could explain parts of Equinor's failure. The managers sold after the sharp decline in gas prices.
Equinor will enter the week on fire with its first-quarter results, a period in which the stock lagged oil prices and many competitors.
Part of the explanation for the price development may be the funds' position in the stock, according to analysts at Nordea Markets.
They tracked 20 of the largest Norwegian funds and how the funds weighted Equinor in the portfolio.
Cut moderation positions
Attitudes became “important.” weight lossweight lossUnderweight means that the investor has fewer shares in the company than usual, so that the share of shares in the portfolio is less than the share of shares in the general market.», notes Nordea's head of analysis Jürgen Broasset in a note.
- It found that Equinor's position in the G20 funds had a weight of 9.24 per cent in the portfolio in October 2023, while Equinor's stake makes up 8.95 per cent of the fund's Oslo Börse index.
- In March, Equinor's weight in funds fell to 6.65 percent.
- Thus, the funds went from owning an additional amount of Equinor shares to owning fewer shares than the company's market size would indicate.
“This repositioning may explain the decoupling from the oil price, with Equinor underperforming by 14 percentage points so far this year, and this may lay the groundwork for a potential recovery in 2024, when the company's financial performance is likely to decline.” It remains Solid,” Bruaset writes.
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Here's what analysts think about Equinor's result
Bruaset confirms to E24 that Equinor stock is highly traded, so it is not certain that the 20 funds' positions alone are the main driver.
But it's fair to think that when local investors position themselves this way, there are many others doing the same, he says.
-I would like to believe that both foreign and domestic funds sold side by side. This may also be related to the fact that communication around dividends has been more moderate than expected, says Broasset, who has a team recommendation at Equinor.
– We had a lot there last year and we relaxed a little during the winter, says technical director Leif Eriksrud at Alfred Berg.
The fund he runs, Alfred Berg Gambach, has been reducing its position in Equinor since last year. In March, the oil share was the third largest underweight in the fund.
Pointing to the decline in gas prices
– He says that the price of gas is primarily what means lower profit expectations.
– Oil prices were quite good. There's no weakness in that, it's the price of gas that came from huge highs from 2022 and fell until 2023 and then into 2024.
Gas prices have fallen significantly from high levels during Europe's energy crisis, helping to dampen Equinor's earnings.
Leif Eriksrud
Equinor's weak price development has also been linked to concerns that Equinor will spend too much money on unprofitable green projects.
-I think it's gotten more attention than it matters. Eriksrud says the company hasn't exactly shown any poor discipline on the capital side.
– If you look through the lens, in the last 10 to 15 years, expensive acquisitions, on the contrary, have occurred in fossil fuels – not in renewables, he says.
This is what analysts expect
Analysts expect Equinor to report strong first-quarter numbers, but the company's numbers will moderate from record levels in recent years.
Equinor will present the results on Thursday next week.
Average analyst estimates of 22 as Equinor They pulled themselves togetherIt shows an adjusted pre-tax result of $7.2 billion in the first quarter, or roughly 79 billion kroner.
In that case, this would be the weakest result since the second quarter of 2021, if the revised result is comparable to previous numbers.
The oil and gas giant has had unusually good results in recent years, partly due to the energy crisis in Europe from 2021.
The adjusted quarterly result of around NOK 80 billion is still well above Equinor's result levels in the years leading up to this crisis.
According to Bloomberg, there is a minority of analysts who view Equinor stock favorably. Seven analysts have a buy recommendation, while 12 have a hold recommendation and 13 have a sell recommendation.
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