Nomura Securities Starts ExxonMobil (XOM) at Reduce

Nomura Securities initiates coverage on ExxonMobil (NYSE: XOM) with a Reduce rating and a price target of $70.00, suggesting 15% downside.

Analyst Theepan Jothilingam commented, "Exxon’s downstream integration and resilience is a powerful tool against low oil prices, while the current AAA rating highlights a best-in-class financial position. What surprised us was a more balanced outlook on growth with a stronger reserve position, which suggests that the often discussed M&A risk is present but perhaps not necessarily as pressing as some argue. Our cautious outlook mainly reflects valuation. The business model is best-in-class but arguably the flight to quality leaves Exxon’s deserved premium multiple too wide to the peer group. We think this partly reflects positioning with US investors keen to retain exposure to Energy (and not veering too far away from the benchmark) but avoiding the US E&P and Services names. Moreover, while we place a lower probability on a large-scale transaction, the capex reduction for 2016 leaves limited scope to positively surprise. On a relative basis, others (notably Shell) can do more. Where could we be wrong? A further deterioration in oil prices is likely to see the flight to quality continue. Exxon could also deliver further material reductions to opex (in addition to the USD 8.5bn in 2015), despite no explicit forward-looking disclosure provided at the analyst update in New York."

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 $84.10 yesterday.

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