Analyst Ratings for Integrated Energy Stocks after 3Q17 Earnings
Analyst ratings for integrated energy stocks
ExxonMobil (XOM), Chevron (CVX), Royal Dutch Shell (RDS.A), and BP (BP) have been analyzed by 25, 24, 11, and ten analysts, respectively. Of these, 28.0%, 67.0%, 91.0%, and 50.0% of analysts rated XOM, CVX, RDS.A, and BP as a “buy,” respectively.
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Shell and Chevron: More “buy” ratings
Shell has received the highest number “buy” ratings among the integrated energy stocks under discussion. Shell’s mean target price is $67.00 per share, which implies an ~5.0% gain from the current level. Shell strategizes to reduce debt by pulling its four levers—divestment, capex reduction, cost cuts, and new projects.
Shell has begun yielding results from this strategy and witnessed a drop in its debt levels. Plus, 9M17 has been an excellent period for Shell compared to 9M16 with respect to cash flows.
If this trend continues, Shell could emerge as a strong company capable of producing returns at even lower points in an oil price cycle. This trend seems to support the assignment of its “buy” ratings.
Chevron received a high number of “buy” ratings, as its capital-intensive projects have started producing results. Chevron plans to improve its cash flows by focusing on its robust upstream and downstream portfolios. Chevron’s mean target price is $123.00 per share, which implies an ~7% gain from its current stock price level.
BP’s “buy” ratings
BP appears to have a solid strategy of lowering cost, cutting capex, and selling non-core assets. BP plans to grow steadily so it could face a weaker oil price environment. BP expects to witness growth in its hydrocarbon production.
Of BP’s seven large upstream projects that were expected to commence in 2017, six have started operations according to schedule. With improving hydrocarbon production and financial performance, BP could witness rating upgrades or a rise in target prices from analysts.
BP’s mean target price of $40.00 per share implies a 1.0% loss from its current stock price level.
ExxonMobil’s “hold” ratings
ExxonMobil has a high number of “hold” ratings. ExxonMobil’s (XOM) expansion activities spread across its business segments, creating an integrated earning model and protecting it partially from oil price volatility. Its inorganic and organic growth strategies in its Upstream segment could expand its upstream portfolio.
XOM’s ongoing augmentation and modernization projects in its Downstream (refining and chemicals) segment could enhance earnings from its Downstream segment.
However, the higher valuation that XOM holds compared to its peers could be the cause for its majority “hold” or “sell” ratings. The market is already factoring in XOM’s expected growth and strong financials. ExxonMobil’s mean target price is $84.00 per share, which implies an ~1% gain from the current level.