Why ConocoPhillips Stock Is Powering Down Today

Key Points

• There's speculation that OPEC+ may agree to increase output during its next meeting.

• ConocoPhillips reported a year-over-year decline in adjusted EPS due to lower energy prices.

• The sell-off in ConocoPhillips stock provides a good buying opportunity for investors with long-term investing horizons.

• 10 stocks we like better than ConocoPhillips ›

Starting the week off on a bullish note, both the S&P 500 and Dow Jones Industrial Average are trending higher today. The same can't be said for shares of upstream energy leader ConocoPhillips (NYSE: COP). While there's no direct news from -- or about -- the company that speaks to the stock's decline today, investors are simply responding to tumbling energy prices.

As of 2:56 p.m. ET on Monday, shares of ConocoPhillips are down 3%.

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Lower energy prices have investors fearful about the company's prospects

As of this writing, oil benchmarks West Texas Intermediate and Brent crude are down 3.7% and 3.4%, respectively, on speculation that OPEC+ will agree to increase production when it meets on Oct. 5.

For investors, the prospect of a hike in output from OPEC+ is concerning since it could continue to drive energy prices even lower. Already, ConocoPhillips management is working to improve its financials. In the second quarter, for example, it reported a 28.3% decrease in adjusted earnings per share (EPS) due in large part to lower energy prices.

Looking to reduce expenses during this downtick in energy prices, ConocoPhillips announced earlier this month a 20% to 25% reduction in its global workforce.

For an exploration and production company like ConocoPhillips, lower energy prices could motivate management to reduce operations at assets where the company generates a slim profit margin, leading to an even more shaky financial situation.

Does the drop in ConocoPhillips stock provide a buying opportunity today?

It's no wonder the possibility of higher output from OPEC+ and a subsequent drop in energy prices are worrying investors today. It's crucial to recognize, though, that the energy industry is cyclical. Enduring the boom and bust periods of energy prices is part and parcel of owning oil stocks.

While it's possible that ConocoPhillips stock could face some volatility in the near term, it's likewise important to appreciate the fact that the company holds an industry leadership position for a reason, and today's pullback offers a great buying opportunity for those with long-term investing horizons.

Should you invest $1,000 in ConocoPhillips right now?

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Scott Levine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.