Opinions
Bryn Talkington
Exxon Mobil
XOM-N
BUY
Jul 28, 2023
Stock price when the opinion was issued
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His firm is doing some research on nuclear power and electricity generators. Hasn't pulled the trigger yet. Likes the idea of data centres driving change in electricity demand.
This name is about 2/3 oil production, and 1/3 natural gas. Also 13-14 refineries well-placed in the US and elsewhere. Chemical products business. New management has improved margins. Will benefit from Trump trade. Timely entry point.
Oil price is low, OPEC is extending cuts. Expectations of a slower economy impacts demand. May also see challenges if Trump encourages oil production. The challenges are showing up in the oil stocks.
CNQ chart shows a breakdown, negative profile. He'd hold off for both. Next seasonally strong time is February, perhaps late January. At that time, he'd prefer CNQ.
Shareholder returns are a little lighter than peers. Valuation a bit higher than peers. Cashflow per share growth is in line with peers, as is the payout ratio. Balance sheet better than peers.
How many boxes does it tick? Ends up being fair. He wouldn't be buying a big oil company right now in front of the OPEC meeting.
We're already seeing a catch-up trade in energy. As the Saudis cut oil production so do these companies who are managing capex well. There's a little but of M&A. Free cash flow yield is around 12% (the best sector on the S&P) for the industry even while earnings are down from last year. This is a great time to dollar-cost average on oil companies. China will stimulate its economy out of necessity (youth unemployment is too high there).