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With 33% ‘Buy’ Ratings, ExxonMobil Ranks Sixth

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Analysts’ ratings for XOM

In the preceding part, we reviewed analysts’ ratings for BP (BP). Now we’ll look at analysts’ ratings for ExxonMobil (XOM), which occupies the sixth spot in our list of seven integrated energy stocks.

XOM is an American integrated energy company with upstream, downstream, and chemicals business segments. XOM has the largest market cap—around $347.0 billion—among the seven stocks discussed in this series.

The analyst rating graph above indicates that seven (or 33.0%) of the 21 analysts covering XOM have rated it as a “buy” in June. Another 12 analysts (or 57.0%) rated XOM as a “hold.” The remaining two analysts rated XOM as a “sell” or “strong sell.”

Leading integrated energy companies Chevron (CVX), BP (BP), and Royal Dutch Shell (RDS.A) have “buy” ratings of 76.0%, 45.0%, and 89.0% of analysts, respectively. We discussed these companies previously in this series.

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The number of analysts covering ExxonMobil declined in June over June 2017. During the same period, ExxonMobil’s mean target price has risen 2.0% to $88.00 per share. XOM’s mean price target implies a gain of around 8.0% from the current level. The implied gains have widened due to a decline in ExxonMobil’s stock price (by 1.0%), coupled with a rise in ExxonMobil’s mean target price (by 2.0%) in the past year.

Why do analysts hold mixed views of XOM?

ExxonMobil (XOM) is a financially strong company with comfortable debt and a good liquidity position. In the first quarter, XOM had the lowest debt in the industry. Also, XOM had surplus discretionary cash flow after covering its capex and dividend payments in the first quarter. XOM’s cash flow surplus was higher than CVX, Shell, and BP.

Also, ExxonMobil’s upstream portfolio is poised for growth with its long-term global strategy in place. Plus, XOM’s downstream portfolio has a healthy global project pipeline, which is expected to bring in growth for the company.

However, XOM trades at a premium to its peer average. XOM trades at a 16.1x forward PE, above the peer average of seven stocks discussed in this series, which is 13.2x. The company trades at a 7.5x forward EV-to-EBITDA, again above the peer average of 5.8x. Presumably, due to premium valuations, many analysts rate the stock as a “hold” or “sell.”

Move to the final part to learn about analysts’ ratings for Petrobras (PBR), the company that has the fewest “buy” ratings from analysts.

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