This is the world’s largest international integrated oil and gas company, and it just reported better second-quarter revenue numbers than expected, but earnings came in below Wall Street estimates. Exxon Mobil Corp. (NYSE: XOM) is an energy sector play that the Merrill Lynch analysts are very positive on long term, as its overall corporate strength plays a significant part in the company’s usually solid earnings reporting pattern.
The Merrill Lynch team has stressed in the past the company’s global downstream chemical segment plays a huge part for Exxon. It may be a part that many others on Wall Street do not fully appreciate as the segment contributes an estimated 16% of overall total revenue. A very solid reason for adding the stock to a long-term growth portfolio is the fact that the company has consistently demonstrated disciplined investing, operational excellence and technological innovation.
Exxon investors are paid a very respectable 4.06% dividend. The Merrill Lynch price target is $100. The consensus price objective is lower at $86.65. Shares closed trading on Friday at $72.69, down almost 22% for the year.
This top refiner has had an up-and-down trading year, and any pullback may be the time to buy or add shares, like Warren Buffett recently did in a big way. Phillips 66 (NYSE: PSX) is a diversified energy manufacturing and logistics company. With a portfolio of midstream, chemicals, refining, and marketing and specialties businesses, the company processes, transports, stores and markets fuels and products globally. Phillips 66 Partners, the company’s master limited partnership, is an integral asset in the portfolio. The company has $50 billion of assets as of June 30, 2015.
The company is geographically diversified and the 15 refineries spread around the country enable it to participate in various location specific market opportunities and also provide an advantage over region-specific competitors. Phillips 66’s refineries are integrated with transportation, marketing and commercial operations that provide crude supply flexibility. These refineries benefit from strong margins due to low feedstock costs thanks to higher proportion of onshore crude sources, which are substantially cheaper than seaborne crudes. Phillips 66 also owns or has interests in three refineries in Europe and one in Asia.
Phillips 66 investors are paid a solid 2.78% dividend. The Merrill Lynch price target is $91. The consensus target is higher at $94.17. The stock closed Friday at $80.60.
The energy sector is nowhere close to being out of the woods yet, and prices could remain volatile. However, with the bullish rising rate history as a sector leader, combined with outstanding dividends and the lowest prices in years, patient investors may want to scale buy shares of some of these large cap leaders now.