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Cowen Downgraded ExxonMobil: Analysts’ Ratings

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Analysts’ ratings for ExxonMobil

ExxonMobil (XOM) is covered by 22 analysts. Among the analysts, seven (or 32%) recommended a “buy” or “strong buy” rating, 12 (or 55%) recommended a “hold” rating, and three recommended a “sell” or “strong sell” rating.

Cowen downgraded ExxonMobil stock from “outperform” to “market perform.” According to media reports, the downgrade was due to ExxonMobil’s capex, which could yield higher cash flows in the future. Currently, Cowen expects the company’s dividend growth rate to slow down. The company’s capex was $26 billion in 2018, which is expected to rise to $30 billion in 2019. Cowen also cut its target price on ExxonMobil stock to $75.

Independent Research, which has a “hold” rating on the stock, increased its target price from $80 to $82. ExxonMobil’s mean target price of $84 per share implies a 6% gain from the current level.

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Royal Dutch Shell (RDS.A), Chevron (CVX), and BP (BP) have been rated as a “buy” by 82%, 78%, and 54% of the analysts, respectively. Other global players like Total (TOT), Suncor Energy (SU), Petrobras (PBR), and YPF (YPF) have been rated as a “buy” by 100%, 92%, 46%, and 79% of the analysts, respectively.

Why analysts are divided

ExxonMobil has a strong upstream portfolio with key hydrocarbon positions ready to increase the volumes. The company has ongoing projects in the downstream segment, which could support its returns from the segment.

ExxonMobil’s debt and liquidity positions have strengthened. In 2018, the company had the best in the class debt ratio (total debt-to-total capital). ExxonMobil had a cash flow surplus in 2018.

However, ExxonMobil stock trades at a premium valuation due to its growing portfolios, strong financials, and integrated earnings model. ExxonMobil trades at a forward PE ratio of 17.9x and a forward EV-to-EBITDA ratio of 7.7x. Both of the ratios are above peers’ averages. ExxonMobil might have “hold” and “sell” ratings due to its high valuations.

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