Opinions
David Burrows
Imperial Oil
IMO-T
TOP PICK
Apr 03, 2024
Stock price when the opinion was issued
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The old Esso. Great company, but better names to own going forward. If an investor has owned since the 1970s, they've done really well but probably sitting on a heck of a tax liability.
Rock-solid balance sheet. Great long-life assets. Operational excellence. Cashflow-generating machine. Bought back 1/3 of company's shares in last 7-8 years; that will continue. 5-year dividend growth rate is 23% a year. Pricing power. A company that will offset inflation. Yield is 2.5%.
(Analysts’ price target is $102.21)Oil prices weak recently, generally gets a little firmer coming into winter. Lots of Middle East conflict. US energy producers in general have performed much worse than Canadian, partly because of debate on whether shale can sustain production.
Longer term, the sector is attractive and these companies will generate a ton of cash and strong dividend growth. Near-term technical questions. He'd love to see price of oil stabilize. It has in last couple of days, but that's geopolitically driven.
Good business. Alberta oil sands are low cost, long life, low decline. Refineries. Integrated, with benefit being that it takes the raw edge off commodity price sensitivity. Owns this indirectly through the back door, with an investment in XOM (major shareholder of IMO).
Modestly bullish on oil. Not his first choice, but no quarrels with it either.
Markets have factored in lower oil prices into the share price, but as the company is also a refiner, its downstream segment will benefit from lower feedstock costs. It trades at 12x earnings, under 2x book and supports a ROE of 21%. The company will announce latest financial results today -- we'll see if they are able to continue growing cash reserves. We recommend setting a stop-loss at $67, looking to achieve $103 -- upside potential of 16%. Yield 2.9%
An alternative to CNQ. Returning capital to shareholders. Debt levels are down to 19%. Dividend growth north of 20%. Has grown dividend 23% a year over the last 5 years. Energy is one of the most under-owned sectors in the world. Good value and good total return. Yield is 2.5%.
(Analysts’ price target is $89.00)Higher oil prices are better. But Trans Mountain pipeline is going to take a bunch more oil from Alberta, and so the differential on Canadian vs. US oil will continue to squeeze in. There's also been a pickup in volumes. He thinks the pension funds and foundations are going to have to own this sector again.