Argus Upgrades Exxon Mobil To Buy

Argus’ Bill Selesky believes Exxon Mobil Corporation XOM is “favorably valued relative to peers and continues to benefit from its diverse asset base and strong cost controls.”

Selesky upgraded the rating on the company from Hold to Buy, with a price target of $104.

The Positives

The analyst believes Exxon Mobil is “now less likely to dilute earnings with an expensive acquisition, as it did with XTO Energy in 2009, and that it will instead focus on leveraging its integrated business model and strengthening operational and financial execution.”

The company raised its quarterly dividend in May 2016 by 3 percent to $0.75 per share. The current dividend yield is approximately 3.4 percent.

In addition, Exxon Mobil reduced its upstream unit costs by 9 percent in 2015, and the company expects to deliver further cost reductions in 2016.

Related Link: Exxon Mobil Settles Texas Refinery Blast Lawsuits

1Q Results

The company announced its 1Q16 results on April 29, with the net earnings declining significantly from the 1Q15 levels. However, the EPS beat both the estimate and the consensus.

“The year-over-year decline in 1Q earnings was driven mainly by lower commodity prices and weaker refining margins, partly offset by stronger results in the Chemicals business,” Selesky mentioned.

The EPS estimate for 2016 has been raised from $2.47 to $2.50 to reflect the 1Q results, while the EPS estimate for 2017 has been maintained, reflecting 70 percent growth from the 2016 estimates.

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Posted In: Analyst ColorLong IdeasUpgradesCommoditiesMarketsAnalyst RatingsTrading IdeasArgusBill Selesky
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