Energy Business

The 2016 Bullish and Bearish Outlook for Exxon Mobil and Chevron

Now that 2015 has ended, 24/7 Wall St. wanted to see what the strategists and analysts on Wall Street expect for the stock market in 2016. The bull market seems to have been interrupted in 2015 as the Dow Jones Industrial Average closed out the year at 17,425.03, down 2.2% last year. That may be hardly a reason to call a bear market ahead, but it comes after six straight years of gains.

Here we take a look at the two energy giants, Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX), both of which had a rotten 2015. In fact, Chevron was one of the five worst performing Dow stocks of the year.

Exxon Mobil

While the index performance of the Dow does not account for individual stock dividends, Exxon closed out 2015 at $77.95, for a loss of 12.8%, including its dividend adjustments.

For the year ahead, the consensus analyst price target from Thomson Reuters is $83.52. If the analysts are correct, the expected total return for Exxon would be 11.2%, if you include its dividend yield of 3.75%.

As 2016 has gotten off to a very bumpy start, Exxon shares were trading at $77.12 after just a few days of trading.

Exxon has not yet revealed its capital spending budget for 2016, but there is little reason to believe that spending is going in any direction except down. That is good news for investors because it means that Exxon likely plans to keep its dividend at least at its current level in an effort to keep its stock price from plunging.

The other bit of good news for investors is that Exxon buys back a lot of its own stock, further enhancing its ability to pay its dividend.

Exxon also gets a boost from its downstream refining and marketing business. Low prices for crude help increase refining margins. The effect is not close to offsetting the loss of revenues from production, but refining profits doubled to $2 billion in the third quarter, while production profits collapsed from $6.4 billion in the third quarter of 2014 to $1.36 billion.

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