ExxonMobil Is Analysts’ Least Favorite Integrated Energy Stock


May. 21 2019, Published 8:07 a.m. ET

ExxonMobil ranks last

In this part, we’ll examine analyst ratings for ExxonMobil (XOM), which occupies the last slot among the integrated energy companies we’re discussing. Firms with high “buy” ratings include Total (TOT) and Suncor Energy (SU), which have 100% and 92% positive ratings. Chevron (CVX) and Royal Dutch Shell’s (RDS.A) “buy” ratings stand at 75% and 82%, respectively. However, BP (BP) has been rated a “buy” by 55% of analysts. Now let’s look at ExxonMobil. ExxonMobil has the largest market cap of around $323 billion.

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Analyst ratings for ExxonMobil

As the graph above shows, five out of the 22 analysts covering ExxonMobil have rated it a “buy.” Another 15 analysts (or 68%) have rated ExxonMobil as a “hold.” The remaining two analysts have rated ExxonMobil as a “sell” or “strong sell.”

Recently, HSBC has downgraded ExxonMobil stock from “buy” to “hold.” The firm has also cut its target price on ExxonMobil stock from $89 to $86.5. Plus, Independent Research has lowered its target price on ExxonMobil from $82 to $81. The firm has a “hold” rating on the stock. ExxonMobil’s mean price target of $85 implies a gain of around 11% from the current level, the lowest among peers.

Why analysts have mixed opinions on ExxonMobil

In the first quarter, ExxonMobil’s earnings fell and missed estimates. Wall Street analysts expect the company’s earnings to fall by 16% in 2019.

However, ExxonMobil continued to solidify its upstream portfolio in the quarter. The company’s key position in offshore Guyana and in the Permian regions continued to strengthen. ExxonMobil made three discoveries in offshore Guyana in the promising Stabroek block in 2019: the Tilapia-1, the Haimara-1, and the Yellowtail-1 wells. Further, the company has revised its Permian production target to 1 million barrels of oil equivalent per day by early 2024. Thus, the company has advanced well on its long-term growth path.

But ExxonMobil stock continued to trade at a premium to peer averages. The stock trades at 16.6x its forward PE and 7.2x its EV-to-EBITDA, which are above the peer averages.

Many analysts have given the stock “hold” or “sell” recommendations due to the company’s lower growth expectations in 2019 and higher valuations.


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