Goldman Sachs Adds ExxonMobil (XOM) to Conviction Buy List; Seen as 'Rare Dividend/FCF Growth Story'

(Updated - July 22, 2015 8:48 AM EDT)

Goldman Sachs upgraded ExxonMobil (NYSE: XOM) from Buy to Conviction Buy with a price target of $95.00 (from $96.00). Analyst Neil Mehta thinks the company is positioned to outperform the the sector and called the company a "rare dividend/FCF growth story among big oils."

"While we believe global integrated oils will face major challenges in the “new oil order” of low crude prices, we believe XOM is uniquely positioned to outperform peers and the Energy sector. We highlight four key positives: (1) improving free cash flow, driving premium dividend growth; (2) an inflection in production growth; (3) strong refining earnings improvement driven by higher global crack spreads; and (4) investor positioning, with many large cap PMs still meaningfully underweight XOM," said Mehta.

"We expect FCF will ramp from $9 bn at $57/bbl Brent in 2015 to $19 bn in 2017 at $65/bbl Brent, as capex decreases and volumes improve. We forecast XOM can raise its dividend, on average, by 6% through 2017 versus COP/CVX of 0%/1%," continued the analyst. "After declining by 4%, on average, from 2012-2014, we expect total E&P volumes will increase by 3%, on average, from 2015-2017 due to several major upstream projects."

Mehta sees refining is an underappreciated value driver for ExxonMobil, stating "We believe the refining net income will increase by an 18% CAGR from 2014-2017 as crack spreads strengthen globally with higher levels of gasoline demand."

For an analyst ratings summary and ratings history on ExxonMobil click here. For more ratings news on ExxonMobil click here.

Shares of ExxonMobil closed at $81.66 yesterday.

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