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Why Are Analysts Divided on ExxonMobil?

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Jun. 6 2019, Updated 8:12 a.m. ET

Analysts’ ratings for ExxonMobil

ExxonMobil (XOM) is covered by 22 Wall Street analysts. Among the analysts, five or 23% recommended a “buy” or “strong buy,” 15 or 68% recommended a “hold,” while two recommended a “sell” or “strong sell.”

Recently, Independent Research, which has a “hold” rating on the stock, cut its target price on ExxonMobil from $82 to $81. ExxonMobil’s mean target price of $85 per share implies an 18% gain from the current level.

Royal Dutch Shell (RDS.A), Chevron (CVX), and BP (BP) have been rated by 91%, 75%, and 55% of the analysts, respectively, as a “buy.”  Total (TOT), Petrobras (PBR), Suncor Energy (SU), and YPF (YPF) have been rated as a “buy” by 100%, 67%, 92%, and 79% of the analysts, respectively.

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Analysts are divided

ExxonMobil continued to solidify its upstream portfolio in the first quarter. The company’s key position in offshore Guyana and the Permian continued to strengthen. The company advanced on its long-term growth path. ExxonMobil has ongoing projects in the downstream segment, which could support its returns from the segment.

In the first quarter, ExxonMobil’s earnings fell and missed the estimates. Going forward, analysts expect ExxonMobil’s earnings to fall 23% in 2019 due to the lower oil price estimate for the year.

ExxonMobil stock trades at a higher valuation due to its growing portfolios, strong financials, and integrated earnings model. ExxonMobil trades at 15.6x the forward PE ratio and at 6.8x the forward EV-to-EBITDA multiple—above the peer averages.

Due to high valuations and an estimated fall in ExxonMobil’s earnings in 2019, the company has “hold” and “sell” ratings.

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