Analysts’ ratings for integrated energy companies
In the previous part, we began reviewing integrated energy companies’ analyst ratings. Of the 23, 22, 11, and 12 analysts covering ExxonMobil (XOM), Chevron (CVX), Royal Dutch Shell (RDS.A), and BP (BP), respectively, 30%, 77%, 91%, and 50% have recommended “buy.” In this part, we’ll look at analysts’ ratings for BP and XOM.
BP’s analyst ratings
BP has been taking strict measures to strengthen financials, and recovering oil prices have supported its cause. BP’s 1Q18 earnings and cash flow, which rose year-over-year, suggest its measures are paying off. Also, BP started eight critical upstream projects on schedule in 2017 and 2018, adding to the company’s overall hydrocarbon production. BP plans to balance its organic cash flow at the oil price point of $50 per barrel in 2018, and plans to lower the oil balance point steadily until 2021.
However, BP has maintained high debt, and had a higher total debt-to-total capital ratio than XOM, CVX, and Shell in 1Q18. It likely received mixed ratings due to its improving financial position and high debt. BP’s mean target price of $47 implies a 5% gain on its current stock price.
ExxonMobil’s analyst ratings
After ExxonMobil posted its 1Q18 results, Credit Suisse cut its target price, possibly due to its earnings falling short of estimates and its stock price falling 4% the day of the release. Credit Suisse decreased XOM’s target price from $82 to $79 and has a “neutral” rating.
ExxonMobil’s expansion activities across business segments have integrated its earning model and protected it partially from oil price volatility. The company’s inorganic and organic growth strategies in its upstream and downstream segments could expand its portfolio and enhance earnings.
XOM’s higher valuation may have prompted its many “hold” and “sell” ratings. ExxonMobil’s mean target price is $85, which implies an ~11% gain from its current price.