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Exxon Mobil (NYSE:XOM) +0.5% in Wednesday’s trading as Morgan Stanley resumes coverage with an Overweight rating and $145 price target, noting the stock trades at a ~55% discount to the broader market, nearly double historical levels despite cash flow/share growth 50% above the S&P and double that of energy peers, and a strong ~7% shareholder return yield.
Exxon’s (XOM) “scale and integration across the energy, chemicals and emerging low-carbon value chains support sustainable competitive advantages, above-average growth and a differentiated value proposition within the energy sector and the broader market,” Morgan Stanley analyst Devin McDermott writes.
The company’s countercyclical growth strategy and cost cuts have boosted earnings by ~$14B as of year-end 2023 from 2019 levels, and looking ahead, McDermott forecasts earnings will rise by another $14.5B over 2023-27 at $60/bbl Brent, driving a compound annual growth rate of ~20% for cash flow per share and ~14% for EPS – well above the S&P 500 of ~9% and nearly double the average of U.S. energy peers.
Exxon’s (XOM) growth is underpinned by ~$6B of incremental cost reductions, investments in low-cost production at Guyana and the Permian Basin, and strategic, high-return projects in downstream and chemicals, the analyst adds.
