UBS has reinforced its positive view on a handful of major European energy firms after a first-quarter reporting season that exceeded expectations. The brokerage said the sector produced a 6% earnings beat even though consensus estimates had already been revised upward prior to companies releasing results.
In its assessment, UBS stressed that strong oil trading performance, steady refining margins and a step-up in shareholder distributions combined to support the upbeat results. The broker singled out TotalEnergies and Eni as its primary recommendations, and noted that it recently upgraded BP to a "buy" rating.
TotalEnergies is described by UBS as the preferred large-cap integrated-energy exposure among European majors, reflecting what the broker calls a balanced mix of operational strength, disciplined capital allocation and an attractive shareholder-return profile. UBS highlighted the company’s first-quarter clean net income of $5.4 billion, which beat consensus expectations. The company also raised its quarterly dividend and announced buybacks that exceeded market anticipations, features UBS views as supportive for the equity.
The brokerage pointed to TotalEnergies’ downstream and trading businesses as important sources of resilience in an environment prone to commodity-price swings. UBS also noted valuation support for the stock, citing an estimated 11.6% organic free cash flow yield for 2026 alongside relatively low leverage.
Eni also features among UBS’s top recommendations despite producing a weaker-than-expected first-quarter profit print. UBS said the market may be underestimating Eni’s improving cash flow profile and the strengthening of its gas and trading operations. The company has raised its fiscal 2026 cash flow guidance by 20% and increased buyback guidance to 2.8 billion, in addition to upgrading guidance for its gas and power segment.
UBS argued there is additional upside for Eni if refining margins normalize, and it described the stock’s valuation as compelling when measured against its longer-term earnings potential and shareholder payout prospects.
Overall, UBS’s analysis frames the recent earnings season as validating for its favoured names, with robust trading performance, resilient downstream results and enhanced shareholder distributions key to the broker’s outlook. The firm’s recent stance change on BP to "buy" rounds out the brokerage’s selective, bullish positioning across the European integrated-energy complex.
- Sector takeaway: UBS sees oil trading, refining and shareholder returns as central to recent outperformance.
- Equity picks: TotalEnergies and Eni are top selections; BP was upgraded to buy.
- Valuation notes: TotalEnergies is cited as offering an estimated 11.6% organic free cash flow yield for 2026 and relatively modest leverage.