Exxon Mobil Corporation (NYSE: XOM) shares continued on an upward trajectory Monday after last week's better-than-expected earnings report that came alongside falling global oil and gas prices. The sell side's reaction to the print has been mixed.
On Friday, Exxon reported third-quarter earnings of 75 cents per share, ahead of the Street’s 67-cent estimate. Sales of $65.05 billion were slightly ahead of estimates.
Bank of America Merrill Lynch analyst Doug Leggate reiterated a Buy rating on Exxon with a $100 price target.
Credit Suisse analyst William Featherston remained Neutral with a $74 target price.
A Bullish Take
Leggate said momentum is building behind Exxon Mobil's plan to double cash flow through 2025.
An inflection in Permian Basin production is "well underway," the analyst said, adding that new oil from drilling in Guyana coming in December will start what he said should be seven or eight years of production growth.
The analyst also cited progress on asset sales, starting with the $3.5-billion sale of its Norwegian oil and gas assets.
"We believe ExxonMobil is poised for a relative recovery after several years of lagging performance," he said.
Exxon Mobil has spent the last few years starting major projects with better cash margins than the legacy base business, Leggate said.
"We continue to believe XOM’s strategy of investing counter to the industry cycle is reloading growth opportunities at advantaged costs, creating capacity for ratable dividend growth."
Cash Flow Deficits
Featherston remained sidelined and said he expects the company to post large organic free cash flow deficits as it starts a multiyear period of counter-cyclical investing while other companies improve cash flow and increase cash returns to shareholders.
"We believe investors are paying a material premium for XOM despite in-line growth, comparable (return on capital employed) and an undifferentiated dividend yield" compared to peers."
Exxon shares were up 3% at $71.69 at the time of publication Monday.
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