BP’s (LON:BP.) Soft Earnings Don’t Show The Whole Picture

Simply Wall St

Tue, February 17, 2026 at 2:31 PM GMT+9 3 min read

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Shareholders appeared unconcerned with BP p.l.c.'s (LON:BP.) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

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LSE:BP. Earnings and Revenue History February 17th 2026

Examining Cashflow Against BP’s Earnings

One key financial ratio used to measure how well a company converts its profit to free cash flow (FCF) is the accrual ratio. In plain english, this ratio subtracts FCF from net profit, and divides that number by the company’s average operating assets over that period. You could think of the accrual ratio from cashflow as the ‘non-FCF profit ratio’.

Therefore, it’s actually considered a good thing when a company has a negative accrual ratio, but a bad thing if its accrual ratio is positive. While having an accrual ratio above zero is of little concern, we do think it’s worth noting when a company has a relatively high accrual ratio. That’s because some academic studies have suggested that high accruals ratios tend to lead to lower profit or less profit growth.

For the year to December 2025, BP had an accrual ratio of -0.12. That indicates that its free cash flow was a fair bit more than its statutory profit. In fact, it had free cash flow of US$11b in the last year, which was a lot more than its statutory profit of US$54.0m. BP did see its free cash flow drop year on year, which is less than ideal, like a Simpson’s episode without Groundskeeper Willie. Having said that, there is more to the story. We can see that unusual items have impacted its statutory profit, and therefore the accrual ratio.

Check out our latest analysis for BP

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

The Impact Of Unusual Items On Profit

BP’s profit was reduced by unusual items worth US$6.6b in the last twelve months, and this helped it produce high cash conversion, as reflected by its unusual items. This is what you’d expect to see where a company has a non-cash charge reducing paper profits. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that’s hardly a surprise given these line items are considered unusual. In the twelve months to December 2025, BP had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

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Our Take On BP’s Profit Performance

Considering both BP’s accrual ratio and its unusual items, we think its statutory earnings are unlikely to exaggerate the company’s underlying earnings power. Based on these factors, we think BP’s earnings potential is at least as good as it seems, and maybe even better! If you’d like to know more about BP as a business, it’s important to be aware of any risks it’s facing. Case in point: We’ve spotted 3 warning signs for BP you should be aware of.

After our examination into the nature of BP’s profit, we’ve come away optimistic for the company. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

Have feedback on this article? Concerned about the content? Get in touch** with us directly.**_ Alternatively, email editorial-team (at) simplywallst.com._

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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