- Exxon Mobil (XOM +0.5%) shares have dropped ~11% YTD amid disappointing earnings and declining production, but Argus analyst Michael Burke believes the market is overreacting to the bad news.
- Argus thinks investors have become too pessimistic about XOM's production profile (47% gas in Q4), and the negative sentiment is reflected in the stock's current valuation; XOM will remain the global energy leader and a superior allocator of capital, as demonstrated by its leading returns on invested capital, the firm says.
- However, Oppenheimer’s Fadel Gheit warns that XOM’s problems could be just getting started, warning that lower oil prices could dim the earnings outlook; at $90 oil and $5 natural gas, XOM could not internally fund its share buyback, and at $80 oil it has to borrow to fund capex and dividends.
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