The Unpolished Gem
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Exxon Mobil (NYSE:XOM) made a modest gain of +0.5% in Wednesday’s trading, catching the eye of Morgan Stanley. The esteemed financial institution bestowed an Overweight rating on the company and set a bullish $145 price target. What caught their attention? Exxon’s stock is currently wallowing at a substantial ~55% discount when juxtaposed against the broader market. This markdown stands at nearly twice the historical average.
A Blaze amidst Ashes
The financial experts at Morgan Stanley were quick to highlight Exxon’s remarkable cash flow per share, which is sprouting at a rate 50% higher than the S&P index. When compared to its energy sector counterparts, Exxon shines even brighter, boasting cash flow per share that is double the standard. Additionally, the company is rewarding its shareholders generously, flaunting a robust ~7% yield in shareholder returns. Now, that’s the kind of return that makes investors’ hearts skip a beat!
The Cinderella Story
Morgan Stanley’s key proponent, analyst Devin McDermott, penned that Exxon’s colossal scale and intricate web of operations spanning through energy, chemicals, and the budding low-carbon value chains have paved the way for sustainable competitive edges. These advantages are fueling above-average growth within the energy realm and even spilling over to the broader market.
An Emerald in the Rough
In what seems like a tale of rags to riches, Exxon’s prudent growth strategy rife with cost-cutting measures has propelled its earnings skyward by a whopping ~$14 billion by the close of 2023—a remarkable feat from the 2019 benchmark. Looking ahead, McDermott paints a rosy picture, projecting another meteoric rise of $14.5 billion in earnings over the period of 2023-2027, assuming a $60 per barrel of Brent. If this prophecy comes to fruition, Exxon is poised to revel in a compound annual growth rate touching ~20% for cash flow per share and a ~14% hike for earnings per share.
A Glimmer of Hope
McDermott’s optimism is bolstered by the company’s commitment to slashing costs by a stupendous ~$6 billion, strategic investments in low-cost production at Guyana and the Permian Basin, and judicious high-return ventures in the spheres of downstream operations and chemicals. With such foresight and resilience in play, it seems Exxon Mobil is far from hitting its peak. The future is poised to witness more glitter adorning this standout entity in the energy landscape.
