Analyst Upgrades Chevron but Downgrades Exxon Mobil, Favors Upstream Levered Names

RBC Capital Markets analyst Biraj Borkhataria downgraded Exxon Mobil Corp XOM to Sector Perform from Outperform at a price target of $125.

On the other hand, the analyst upgraded Chevron Corp CVX to Outperform from Sector Perform at an increased price target of $180.00 (from $165.00 earlier)


Take on XOM:

  • The analyst expects moderating earnings momentum, with refining margins declining significantly along with persistent challenging chemicals margins amid a tough market.
  • Borkhataria projects XOM to be impacted by continued volatility in commodity prices and more exposure to refining than global peers as downstream is nearing the recession level.
  • Nevertheless, the analyst applauds XOM's cost-saving efforts and sees quarterly earnings benefiting from it.
  • Borkhataria reduced estimates for EPS to $10.75 from $11.08 in 2023 and raised estimates for 2024 EPS to $11.12 from $11.07 earlier.
  • The analyst cut the estimate for production to 3.69 mboe/d (from 2.77 mboe/d earlier) in 2023 and 3.73 mboe/d (from 3.90 mboe/d earlier) in 2024.
  • At current futures prices, the analyst expects net income to be 7% below consensus earnings in 2023 ($78 Brent) and 13% below in 2024 ($74 Brent).
  • Also ReadExxon Mobil Gives Cold Shoulder to Climate Change Proposals, Claims It's Not a Break-Up
  • Price Action: XOM shares are trading higher by 0.29% at $102.48 on the last check on Thursday. 


Take on CVX:

  • The analyst is bullish on the company's conservative balance sheet, which aids in maintaining dividend payments during recent downturns while executing value-accretive M&As.
  • With OPEC+ likely to support oil prices, the analyst expects CVX's upstream (and oil) rich portfolio to shield against the downturn, with most of its LNG portfolio boasting long-term, oil-linked contracts.
  • Given the Kazakhstan project is nearing completion in 2023-24, the analyst sees lesser risks related to significant project execution.
  • The analyst raised estimates for 2023 production of 3.05 mboe/d (vs. 3.04 mboe/d) and EPS of $15.23 (vs. $13.91 earlier). 
  • He now expects 2024 production of 3.24 mboe/d ( vs. 3.13 mboe/d earlier) and EPS of $16.51 (vs $15.92 earlier).
  • Also Read: Chevron's Defenses Stand Strong Amidst Volatile Market Dynamics: JP Morgan Analyst
  • Price Action: CVX shares are trading higher by 0.65% at $151.54 on the last check Thursday.
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