RBC Capital Markets revised its forecasts for TotalEnergies (TTE.PA, TTE.L) after a model update to account for the energy group's "relatively soft" second-quarter results and the research firm's latest oil and gas price deck.
"While TTE continues to exhibit underlying upstream volume growth, its exposure to the Middle East has weighed on earnings in both the upstream and downstream, and in 2Q26 the company's trading positioning weighed on IG earnings. Looking forward, assuming gas prices remain close to current levels, we would anticipate a reversal of the trading 'underperformance' seen in 2Q26. However, the impact in 2Q also serves as a useful reminder that majors do seem to take directional positions on commodities, rather than it all being ['infrastructure-backed optimization']," according to a Thursday note.
Analysts anticipate TotalEnergies will reaffirm its power segment growth plans at its investor day on Sept. 28 and commit to achieving positive free cash flow for the division from 2026 onwards.
"This brings TTE into a new phase, with a funding source of its dividend [untied] to oil and gas prices - a key differentiator versus peers. Offsetting this are some of the challenges to the investment case, including higher Middle East exposure (does building more pipelines out of the ME make it lower risk, or can they be damaged just as easily as facilities?), as well as higher execution risk at key projects such [as] in Mozambique, Uganda and Papua New Guinea. TTE offers elevated FCF/sh growth over time, but lower near-term FCF," the note said.
Within this context, RBC noted that higher refining margins partly offset its lower oil price deck. As such, the research firm raised its EPS projection for full-year 2026 by 2% and reduced its 2027 forecast by 4%, while reiterating its outperform rating and price target of 85 euros on the stock.