Exxon Mobil Is This Analyst's Top Pick, Citing Premium Valuation Relative To Peers

Piper Sandler analyst Ryan M. Todd reiterated the Overweight rating on Exxon Mobil Corporation XOM with a price target of $136.

The consistent effort to remake XOM's portfolio for leading profitability and resilience through the cycle is increasingly evident, the analyst writes.

During CEO Darren Woods' tenure, the analyst added, Exxon Mobil has made aggressive efforts to concentrate assets at the low end of the cost curve with improved asset quality/duration (Guyana, Permian, Qatar LNG, Mozambique, etc.).

The company also underwent structural reorg/cost reductions.

Exxon Mobil pursues deals where it believes that it has a unique ability to extract or create additional value, even beyond traditional "synergies," Todd adds.

XOM remains a "top pick" among the IOCs, Todd says, with a global portfolio of assets, both upstream and downstream, that offers a leading combination of returns and long-term visibilty on CF/ FCF generation. Adding to the long-term confidence in the CFO generation is the lowest "risk" portfolio of its peers, both in terms of a lower capital reinvestment risk vs. European peers (ie. uncertainty associated with low-carbon/integrated power spend) and lower geopolitical/project execution risk than Chevron Corporation CVX (TCO, Australia LNG, Eastern Med gas, etc).

As such, the analyst expects XOM to sustain a material (and potentially growing) valuation premium relative to its peers.

The analyst estimates FY23 EPS of $9.66 with an EBITDA of $76.447 billion.

For FY24, the analyst sees EPS of $11.69, with an EBITDA of $88.214 billion.

Price Action: XOM shares are trading higher by 0.81% to $103.79 on the last check Friday.