This article first appeared on GuruFocus.
TotalEnergies (NYSE:TTE), the global oil, gas and integrated-power giant, climbed approximately 2.0% to $88.0801 in U.S. trading Monday as Brent crude broke above $90. Energy stocks caught the oil-price surge even as rising bond yields dragged on the broader European market.
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The company entered the rally with serious financial firepower. TotalEnergies generated $9.8 billion in cash flow and $6 billion in adjusted net income during the second quarter, cut gearing to 13% and lifted its quarterly dividend 5.9% to 0.90 per share. That quarterly cash haul alone represents roughly 4.8% of its current market value.
But the valuation leaves little room for an easy victory. The shares trade 38.69% above the $63.51 GF Value estimate, signaling that investors already pay a hefty premium for TotalEnergies' earnings power. Middle East disruptions also erased an average of 210,000 barrels of oil-equivalent production per day during the second quarter. Higher crude can soften that blow, but the next leg depends on restoring those barrels while keeping the pricing windfall.