How Analysts Keep Changing Tune on Exxon Mobil After Earnings

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After Exxon Mobil Corp. (NYSE: XOM) reported fourth-quarter and full-year 2016 results Tuesday morning, the stock fell about $1.50 (1.8%) before recovering a bit by the end of the day. One could argue that based on those results, the carnage could have been worse — a lot worse.

Quarterly earnings per share (EPS) were down by a third year over year and even further below estimates. Revenues were a little higher, but still below expectations. Over the course of the full year, the results were even worse.

Two things probably saved the company from a darker fate on Tuesday: rising crude oil and natural gas prices, and a $6.6 billion acquisition of a huge swathe of acreage in the Permian Basin. Both speak of better days ahead.

Analysts at Merrill Lynch called the quarter’s results “benign” and said now investors should focus on Exxon’s strategy review currently set for March 1. The analysts added some detail:

In our view 4Q16 results were operationally in-line with Street expectations and relatively light on new news. 2017 capex of $22bn looks in-line with previous guidance. Additional updates will need to wait for the March 1st Analyst Day. With limited upside from current levels we reiterate our Neutral rating and $95 [price objective].

S&P Equities reiterated its Hold rating on the stock, but it cut its 2017 EPS estimate from $4.23 to $4.21 and initiated its 2018 EPS estimate at $4.81. The firm went on:

Our 12-month target of $87, cut $5, reflects a 10X multiple of price to projected ’17 operating cash flow, slightly above XOM’s historical forward average. Q4 EPS of $0.89 before a $0.48 impairment charge, vs. $0.67, beating the Capital IQ consensus view by $0.19. Excluding the impairment charge, upstream segment earnings more than doubled vs. Q3, mainly on better realized prices and volumes. We see XOM’s dividend payout ratio returning to manageable levels in ’17 and see Permian Basin as a key catalyst.

Credit Suisse, which has an Underperform rating on the stock, maintained the rating but raised its price target:

It continues to be a source of annoyance to investors that some US majors do not include a full cash flow statement in their release. The European Majors do so. Deferred taxes have been a drag on cash flow in 2016 across the group … We raise EPS by 1-2%. Free cash flow expands. We raise our [target price] to $78/sh (from $75/sh). There is upside to $83/sh depending on [free cash flow] delivery.

Other analysts also weighed in:

  • Barclays cut its price target from $97 to $94, with an Equal Weight rating.
  • Goldman Sachs cut its price target from $93 to $89, with a Neutral rating.
  • Independent Research cut its price target from $90 to $87 and rates the stock a Hold.

In the noon hour Wednesday, Exxon’s stock traded down 1.2% to $82.87, in 52-week range of $74.26 to $95.55. The 12-month consensus price target is $88.74 and very likely does not yet include these recent changes.

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