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Mixed analyst reviews today on oil majors, Exxon seems to fare worst

  • Analysts were out with opinions on some of the oil majors, although their comments had little impact on stock prices with energy stocks broadly tumbling today and Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) among the biggest drags on the Dow.
  • Oppenheimer came out in favor of CVX, reiterating its Outperform rating and raising its price target to $140 from $130 to reflect an improving operating and financial outlook; the firm was more muted on XOM, where returns are declining in part because capital spending and operating costs continue to rise, as the low-hanging fruit has been picked, and major project schedules continue to get longer, boosting unproductive capital.
  • Morgan Stanley wrote favorably about Total (NYSE:TOT) and Shell (RDS.A, RDS.B), which the firm says offer particularly attractive combinations of free cash flow growth and dividend yield, while offering a pessimistic view of XOM and BP, seeing little reason to expect capex to come down for both, thus leading to more lackluster free cash flow prospects.
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Comments (13)
  • Scootrd
    , contributor
    Comments (219) | Send Message
     
    Every time CVX dips... I consider it a buying opportunity to increase my position. Great PE , great Yield.

     

    Others mileage may vary,

     

    Semper Fi
    2 Sep 2014, 06:50 PM Reply Like
  • TBDI
    , contributor
    Comments (296) | Send Message
     
    hovering around 12 PE when the market norm is 20. What's to hate about CVX?
    2 Sep 2014, 07:37 PM Reply Like
  • Bob Carl
    , contributor
    Comments (268) | Send Message
     
    I own over 10,000 XOM and I continue buying XOM. I am buying via the DRIP $10,000 every other week and will do so for the next 10 years to age 70. It's a major part of my retirement plan. Strange to say, I actually like analysts comments like those cited in the article as they give me better buying opportunities.

     

    I hope my belief that XOM's management can deliver over the long term is correct. Since 1870, that has been a correct bet. But then, XOM and its predecessor Standard Oil had John D. Rockefeller, John Archbold, Walter Teagle and much later, Lee Raymond as CEOs. I doubt if Mr. Tillerson is made of the same cloth, but I trust that when his tenure as CEO ends, the next CEO will be more dynamic.

     

    But time will tell. Maybe Tillerson is right to invest in Russia and to have invested in XTO. Right now, he looks foolish. But as a former CEO myself, I know that outsiders, even analysts, have little insight into what really goes on inside a company. So, I tend to give Mr. Tillerson the benefit of the doubt. We will see.
    2 Sep 2014, 07:37 PM Reply Like
  • dostoevsky228
    , contributor
    Comments (274) | Send Message
     
    XOM management..you are blind...what has T-rex and his high priced bellhops done since he became CEO? OVERPAID for XTO in one of the worse corporate acquisitions in history..it is now 5 years out! Said over and over again that XOM would increase production and has done NOTHING but had production decreases for years now. CVX and XOM were around the mid 60's in mid 2000's and NOW XOM sits at 98+ and CVX sits at 128+ with a better dividend yield for decades..YOu doubt t-rex is of the same cloth??? T-Rex is no Lee Raymond and is and has been the wrong CEO since 2006! Listen to the XOM analyst reports to see the smoke and mirrors pony show they put on. It is XOM shareholders who give t-rex the benefit of doubt that make XOM shareholders like ME disgusted.....wake up
    2 Sep 2014, 09:04 PM Reply Like
  • Bob Carl
    , contributor
    Comments (268) | Send Message
     
    Actually, I am blind enough to have out-performed the S&P by about 300 basis points over the last 20 years, not including a 22% per annum IRR over a 13 year period from IPO to sale of my public company.

     

    I was often called incompetent by outside investors and analysts during my CEO tenure, but I had the last laugh, so think I have a bit more perspective than most.

     

    Lee Raymond was a good CEO, but not without his flaws. Like overrated Jack Welch at GE, he maximized current earnings at the expense of longer term returns. XOM's current production issues result from Raymond's underinvesting in long term production. He cared only about return on capital, not extra barrels. Raymond used cash to buy stock, not barrels. His one big and successful coup was buying Mobil for stock. That was a financial, not an engineering exercise. By buying Mobil and stripping costs out, Raymond could drive EPS during his tenure. Remember too, that it was sainted Lee Raymond who choose Rex Tillerson as his successor.

     

    It takes a decade or more to bring major production projects on line. XOM is now seeing the results of focusing more on ROC than barrels per day of production.
    3 Sep 2014, 08:30 AM Reply Like
  • dostoevsky228
    , contributor
    Comments (274) | Send Message
     
    I applaud your long term results. True, raymond did finally throw his hat to tillerson. But the XTO deal is T-rex's standard, and he admits he overpaid for it, by "a year or so." I have just got continuously frustrated with their patient line for all these so called production increases. Kearl start up has been flawed. Production continues to decline, eps beats are bloated based on asset sales, and what about having the lowest dividend yield of any super major? Production was suppose to increase in 2012 and 2013...declined..2014 was suppose to increase..decreased. Obviously XOM is a juggernaut and i don't lose sleep about it's sustainability. It's just is second to CVX on so many levels duringthe past 5-7 years (not 10, not 20..true, where XOM metrics look better/some due to raymond) have been severely limited in performance.
    3 Sep 2014, 09:35 AM Reply Like
  • SteveTheHawk
    , contributor
    Comments (1887) | Send Message
     
    I'm hoping for increased negativity by analysts on both XOM and CVX. Looking to buy some more.
    2 Sep 2014, 08:00 PM Reply Like
  • BAHAMAS1
    , contributor
    Comments (3299) | Send Message
     
    CVX opportunity is here...right now.

     

    Imo $140 will only be a starting point for further upward movement.
    2 Sep 2014, 08:07 PM Reply Like
  • SteveTheHawk
    , contributor
    Comments (1887) | Send Message
     
    You may very well be correct about CVX, Bahamas. I made two purchases earlier this year at $112 and $111. If I grimace really hard, I can get the anchor bias out of my head.

     

    With that done, I'm thinking that while it's a great company it doesn't seem to be a bargain at current prices (about $127 today). From a DGI perspective and looking at the Fast Graph, the P/E is slightly above normal. Earnings growth estimates are 5.5% and current yield is basically in a normal range. It also barely qualifies under the Chowder Rule (which I enjoy using).

     

    What do you see as the driving force behind your predicted price appreciation? (I'm not arguing with you.... I would very much like your opinion). Thanks.

     

    Steve
    2 Sep 2014, 08:59 PM Reply Like
  • BAHAMAS1
    , contributor
    Comments (3299) | Send Message
     
    Steve The Hawk-
    Some reasons:
    1. Gorgon coming on stream 2015 with approx 75% under contract.Far East is starved for gas.

     

    2. The world is growing both in population and in financial status, i.e. a broadening middle class at all levels. Usage and Need of fossil fuel and its derivatives will continue to grow. As they say "they ain't making it anymore".

     

    3. CVX is a Very shareholder friendly company with an Excellent and Sustainable dividend. Current yield is one of highest among majors at 3.4%.

     

    4. Imo major brokerage houses are currently positioning themselves (& their clients) for future upgrades by lowering their ratings now , (save Oppenheimer who upgraded their price to $140 from $130 on 2 Sept.).

     

    5. I agree it's not a bargain here, but 1-2 years from now it will seem like a steal at these prices, especially if you reinvest the dividends .
    Maybe edge in now and/ or and wait for a temporary mrkt downturn to add.

     

    Good luck to you & have a great day.
    3 Sep 2014, 07:36 AM Reply Like
  • SteveTheHawk
    , contributor
    Comments (1887) | Send Message
     
    Thanks for your response, Bahama.
    3 Sep 2014, 11:15 AM Reply Like
  • Victor the Worker
    , contributor
    Comments (16) | Send Message
     
    Both XOM and CVX have good 3 year average returns on invested capital, 23% and 18%, respectively.
    2 Sep 2014, 08:59 PM Reply Like
  • Tueffelhund85
    , contributor
    Comments (189) | Send Message
     
    I am buying XOM at these lower levels now. T-Rex will be gone someday and if he is the reason for the company's declining performance, stock should skyrocket when he leaves. In the meantime, XOM has lots of cash and assets to weather any storm. It's a safe pick.

     

    Chevron is a wonderful company too, but it's a bit pricey now. Chevron may report a bad quarter and drop $25.00 and that's when I will jump in.

     

    Until then, I will wait collect my dividends from COP, OXY, SU, CNQ, CVE, PWE and XOM.
    2 Sep 2014, 09:46 PM Reply Like
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