Analysts’ ratings for XOM
In the previous article, we reviewed analysts’ ratings for BP (BP). Now let’s look at their ratings for ExxonMobil (XOM), the company that occupies the sixth spot on our list of the top seven integrated energy stocks.
XOM has the largest market cap among the seven stocks under discussion in this series at ~$341 billion.
The graph above shows that six (or 30%) out of the 20 analysts covering XOM have rated it as a “buy” as of August 31. Another 11 analysts (or 55%) have rated XOM as a “hold.” The remaining three analysts have rated XOM as a “sell” or a “strong sell.” Other leading integrated energy companies Chevron (CVX), BP (BP), and Royal Dutch Shell (RDS.A) have “buy” ratings from 76%, 40%, and 88% of analysts, respectively.
In the past year, ExxonMobil’s mean target price has risen 8% to $89 per share. XOM’s mean price target implies a rise of ~10% from its current level. Its implied gain has increased due to the steeper rise in its mean target price (8%) compared its stock price (6%).
Why analysts have mixed opinions on XOM
ExxonMobil is a financially healthy company with comfortable debt and a good liquidity position. In fact, in the second quarter, XOM had the lowest debt in the industry. Also, XOM had surplus cash from operations after covering its capex and dividend payments in the first half.
However, XOM is trading at premiums to its peer averages. It’s trading at a forward PE of 15.5x, above the peer average of 11.2x. It’s also trading at a forward EV-to-EBITDA of 7.2x, again above the peer average of 5.6x. Presumably due to its premium valuations, many analysts have rated the stock as a “hold” or a “sell.”