Exxon Mobil (XOM): Sleeping Giant or Sickly Old Man

April 26, 2013 1:55 PM EDT
Get Alerts XOM Hot Sheet
Price: $86.28 -1.24%

Rating Summary:
    5 Buy, 14 Hold, 8 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 13 | Down: 22 | New: 54
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With $7.6 billion in Q1 buybacks and dividends, Exxon Mobil's (NYSE: XOM) capital returns stand out as a one of the company’s most attractive qualities. Exxon recently increase its dividend to $0.63, a significant raise compared to last year. In addition, it purchased $5 billion in outstanding shares through March.

With this in mind, Cowen analyst Asit Sen thinks the stock's underperformance is "unwarranted," and he thinks shares are about to turn a corner. Not everyone on Wall Street agrees.

Analyst Arjun N. Murti of Goldman Sachs is Neutral rated on Exxon shares following 1Q earnings, and he sees E&P production declines and a reduction in the overall cash returns.

"We believe XOM's premium EV/DACF valuation could be at risk, as its historic free cash flow and ROCE premium versus the sector diminishes," said Murt. "With BOE production down 3.5% y-o-y in 1Q2013 and our forecast for a 2% full-year drop is 2013 on-track (XOM guidance calling for about a 1% full year decline) – despite sharply higher capex over the past five years – we believe acquisition risk is rising for XOM."

Weighing in with a more broad view on the integrated oil sector, Deutsche Bank analyst Paul Sankey plucked a line from British economist John Maynard Keynes, who coined the phrase, "In the long run we are all dead."

"It is less the results and more the structural and management issues that dominate the investment case for oils today. In fact the results are pretty miserable - best summed up by 'no growth and declining returns'."

Goldman Sachs and Deutsche Bank both rate ExxonMobil Neutral.

For an analyst ratings summary and ratings history on ExxonMobil (NYSE: XOM) click here. For more ratings news on ExxonMobil click here.

Shares of ExxonMobil closed at $88.07 yesterday.

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