Exxon Mobil Corp. (NYSE: XOM) Stocks are up 25.4% since the start of 2022 as investors pile into energy stocks, value stocks and dividend stocks. An analyst said Thursday that a closer look at Exxon’s fundamentals reveals it could actually be an under-the-radar growth stock.
The analyst: Bank of America analyst Doug Leggate reiterated his Buy rating and $110 price target for Exxon.
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The thesis: Leggate said Thursday that Exxon’s long-term growth strategy shifts from four years of investing to an extended period of cash flow growth in 2022. Over the next five years, Leggate estimates Exxon will generate $100 billion. dollars of excess free cash flow at Brent crude oil prices of $60 a barrel. Brent is currently trading above $112/bbl.
“Essentially, with stable expenses, XOM’s annual free cash flow increases almost 5x to $60 (actual). Who knew? XOM is a growth action! said Leggate.
In addition to being a cash flow machine at crude oil prices above $60, Leggate forecasts Exxon’s crude oil price to drop from $41 in 2021 to $30 by 2027, creating protection downside for investors in the event of a sharp decline in oil prices. .
Leggate says Exxon will likely have the ability to buy back 30% of its shares over the next five years. He also expects management to raise the stock’s dividend by 4.4% in time.
For now, Leggate said Exxon remains its top oil stock pick, largely because its cash flow growth is outpacing its broader peer group.
Benzinga’s opinion: While cash flow growth is certainly attractive on its own, Exxon is still a far cry from the type of stock investors typically view as growth stocks. Leggate expects Exxon to increase revenue by 80.8% in 2022 before the oil major’s revenue drops 17.5% in 2023 and another 10.8% in 2024.
Final Notes for XOM
|March 2022||BMO Capital||Maintains||Market performance|
|February 2022||Titles B of A||Maintains||To buy|
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