4 Reasons Why JPMorgan Upgraded ExxonMobil

Exxon Mobil Corporation’s XOM execution seems to have improved, JPMorgan said in a Wednesday upgrade.

The 2021 consensus expectations are low, the company’s dividend yield is more secure and the stock valuation is reasonable, in the sell-side firm's view. 

The ExxonMobil Analyst: Phil Gresh upgraded ExxonMobil from Neutral to Overweight and raised the price target from $50 to $56.

The ExxonMobil Thesis: The company’s capital discipline is improving, as it has imposed a capital expenditure restriction of $20-$25 billion, which should preserve its dividend and balance sheet, Gresh said in the upgrade note.

The stock has “a potential upside case where XOM’s dividend coverage breakeven approaches $45/bbl Brent and its FCF yield approaches 11.5% at $60/bbl Brent longer term, assuming modestly higher production, slightly higher normalized Downstream/Chemicals margins and capex discipline,” the analyst said. 

ExxonMobil has a substantial asset base “that ought to be dramatically whittled down as the macro improves,” he said.

“This would have the dual benefit of reducing debt and accelerating XOM’s organic ROIC improvement from higher margin investments like Guyana.”  

XOM Price Action: Shares of ExxonMobil were trading 0.7% higher at $48.22 at last check.