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On Thursday, BofA Securities resumed coverage on ExxonMobil (NYSE:XOM), issuing a Neutral rating and establishing a price target of $124.00 for the oil and gas giant. The firm highlighted ExxonMobil's strong long-term prospects due to its extensive resource life, competitive cost curve position, and advantageous refinery placement in the United States. Additionally, the company's leading role in new technologies, including lithium and carbon capture, utilization, and storage (CCUS), as well as its gasoline to chemicals initiatives, were noted as positive factors.
The analyst from BofA Securities underscored ExxonMobil's full valuation in the medium term, influenced by the current oil prices and the company's significant exposure to the oil market compared to its integrated peers. Despite the positive long-term outlook, there is a concern that the near-term EBITDA (earnings before interest, taxes, depreciation, and amortization) from downstream projects could underperform if margins hit expected low points.
ExxonMobil's stock rating and price target reflect a careful balance between the company's industry-leading positions and the potential challenges it faces in the short term. The firm's analysis suggests that while ExxonMobil is well-positioned for future growth in both traditional and emerging sectors, investors may need to temper their expectations for immediate financial performance.
The price target of $124.00 implies a neutral stance on the stock, indicating that BofA Securities believes the current share price accurately reflects ExxonMobil's value given the existing market conditions and company fundamentals. The firm's commentary suggests a watchful approach, acknowledging both the strengths and potential risks associated with ExxonMobil's business strategy.
In other recent news, ExxonMobil has made significant strides in seismic gas research off the island of Crete, advancing to the second phase of the project. The company, in a consortium with Hellenic Energy, surpassed the initial requirement of 2D seismic data, bolstering Greece's efforts to explore its hydrocarbon potential. Concurrently, ExxonMobil issued $171.97 million in floating rate notes due in 2074, a move seen as part of its strategy to manage its capital structure and long-term financing needs.
Piper Sandler maintained an Overweight rating on ExxonMobil, despite a minor dip in earnings per share (EPS) projections, now at $1.91. This was echoed by Scotiabank and Mizuho, who held their Neutral ratings steady. ExxonMobil's third-quarter earnings are projected to range between $6.9 billion and $10.1 billion, translating to $1.56 to $2.28 per share. However, a decrease in third-quarter upstream earnings due to changes in oil prices is anticipated.
Moreover, ExxonMobil, along with other major energy firms, may need to borrow substantial amounts to sustain shareholder returns due to a recent decline in oil prices, as noted by RBC Capital Markets. In addition, ExxonMobil and other top U.S. energy exploration companies have reportedly paid more than $42 billion to foreign governments, exceeding their payments within the United States.
InvestingPro Insights
ExxonMobil's financial metrics and market position offer additional context to BofA Securities' Neutral rating. According to InvestingPro data, ExxonMobil boasts a market capitalization of $536.07 billion, reflecting its status as a major player in the oil and gas industry. The company's P/E ratio of 14.46 suggests a reasonable valuation relative to its earnings, aligning with the analyst's view of full valuation in the medium term.
InvestingPro Tips highlight ExxonMobil's strong dividend history, having raised its dividend for 41 consecutive years and maintained payments for 54 years. This track record underscores the company's financial stability and commitment to shareholder returns, which may be attractive to income-focused investors despite the Neutral rating.
The company's revenue of $345.13 billion over the last twelve months, coupled with a gross profit margin of 31.61%, demonstrates its significant market presence and ability to generate substantial cash flows. This financial strength supports BofA's positive outlook on ExxonMobil's long-term prospects and its ability to invest in new technologies like lithium and CCUS.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips on ExxonMobil, providing deeper insights into the company's financial health and market position.
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