Analyst Favors Exxon Mobil Deal, But Downgrades Pioneer Natural Resources: Here's Why

BMO Capital Markets analyst Phillip Jungwirth downgraded Pioneer Natural Resources Co PXD to Market Perform from Outperform rating.

The analyst reduced the rating on its all-stock merger with Exxon Mobil Corp XOM for $59.5 billion, or $253 per share.

Under the terms of the deal, Pioneer shareholders will receive 2.3234 shares of ExxonMobil for each Pioneer share at closing. The acquisition deal represents an 18% premium to Pioneer's undisturbed closing price on Oct. 5 and a 9% premium to its prior 30-day volume-weighted average price on the same day. 

Related: Jim Cramer Urges Reevaluation Following Pioneer's $60B Exxon Deal - 'I Will Sell Every Share...'

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The analyst views the deal favorably, with the Permian footprint improved at a reasonable valuation.

"Our revised price target is based on that for XOM and the acquisition exchange ratio. While PXD has only outperformed E&P peers by 3/5% in the last 10/15 trading days, we anticipate the deal to close in 2Q24," Jungwirth wrote.

He revised EPS to $5.73 (from $4.99) for Q3 FY23, $21.57 (from $20.63) for FY23, and $29.63 (from $29.21) for FY24. 

Price Action: PXD shares are trading higher by 0.17% at $248.65 on the last check Monday.