Exxon Valued Favorably Compared To Its Peers

Exxon Mobil Corporation (NYSE: XOM) continues to benefit from the diversity of its asset base and its stringent cost controls, Argus’s Bill Selesky said in a report. He maintained a Buy rating and a price target of $104 on Exxon, while mentioning that the company was “favorably valued relative to peers.”

Favorably Valued

Exxon reduced Upstream unit costs by 9 percent in 2015 and expects to achieve a further decline in costs in 2016. Analyst Selesky believes that Exxon would not dilute earnings with an expensive acquisition, as it had done with XTO Energy in 2009. Exxon may instead continue to focus on “leveraging its integrated business model and strengthening operational and financial execution.”

In May 2016, Exxon announced a 3-percent hike in its quarterly dividend to $0.75 per share, or $3.00 annually. Selesky mentioned that the shares offer a “sustainable dividend,” with a yield of about 3.4 percent. Exxon’s shares have underperformed so far this year, having risen 12.7 percent, versus a 14 percent gain in the S&P 500 Energy index.

Q2 Results

Exxon reported its Q2 net earnings at $1.70 billion, or $0.41 per diluted share, down from $4.19 billion, or $1.00 per diluted share, in 2Q15. EPS missed the consensus expectation of $0.64 and the Argus estimate of $0.55.

The analyst reduced the EPS estimate for 2016 from $2.50 to $2.36 to reflect the 2Q miss as well as continued weak commodity prices in 2H16.

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