Morgan Stanley Downgrades Exxon Mobil (XOM)
Morgan Stanley reported on Wednesday that it has reduced its rating on energy company, Exxon Mobil Corporation (XOM)
The firm has downgraded XOM from “Equal Weight” to “Underweight,” and has reduced its price target from $90 to $85. This price target suggests a -4% decline from the stock’s current price of $88.72.
Analyst Evan Calio commented, “CVX to outperform XOM by 55% over the next 5 years (total returns). We believe the combination of CVX’s relatively higher production growth (+5% CAGR) and relatively improving returns (to +20% ROCE in 2017) in each of the next 5 years will drive relative share price outperformance vs. XOM. We derive our stock price forecast by using our production growth forecast and downstream forecasts to project (1) cash flows estimates and returns on capital employed (ROCE) to predict (2) valuation multiples: with stock forecasted stock price being the product of these two forecast. Production growth is visible based upon the 15 top growth projects for CVX and XOM each that we detail, model, and sensitize in this report. We model returns for each project and believe CVX’s projects drive 4% higher relative upstream ROCE on a 5-year basis.”
Exxon shares were mostly flat during Wednesday morning trading. The stock has increased 8% in the past year.
The Bottom Line
Shares of Exxon Mobil Corporation (XOM) have a 2.58% yield, based on Wednesday morning’s price of $88.32.
Exxon Mobil Corporation (XOM) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.4 out of 5 stars.
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