Morningstar

ExxonMobil Posts Strong 1Q on Rising Oil Prices

We are increasing our fair value estimate slightly to $82 from $81 for the narrow-moat firm.

Securities In This Article
Exxon Mobil Corp
(XOM)

Exxon maintains one of the lowest dividend breakeven of the group at about $40 per barrel, ensuring its safety in almost any price environment. Dividend growth the last two years, however, has been relatively paltry compared with historical rates. For the second consecutive year, Exxon increased the dividend only 2.7%, well below the historical average of approximately 6%. We think this reflects the firm’s more cautious outlook on commodity prices and its desire to retain flexibility to make opportunistic acquisitions as opposed to the its cash flow generating ability. While its also refrained from repurchasing shares as well, we expect both dividend growth and repurchase to occur in the coming years given our forecast for increasing free cash flow.

Our fair value increases slightly to $82 from $81 after incorporating expected U.S. tax changes. Our narrow moat rating is unchanged.

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About the Author

Allen Good, CFA

Director
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Allen Good, CFA, is a director, Europe, for Morningstar*. Based in Amsterdam, he covers the oil and gas industries as well as manages a team of multi-industry analysts. He is also chair of the Morningstar Research Services Economic Moat Committee, a group of senior members of the equity research team responsible for reviewing all Economic Moat ratings issued by Morningstar. In this role, he is responsible for ensuring consistent application of Morningstar’s Economic Moat methodology across sectors and regions as well as updating and revising the methodology. His specialty is global integrated oils such as Exxon, Chevron and Shell and US independent refiners such as Valero and Marathon Petroleum. He also contributes to developing hydrocarbon price and petroleum product margin forecasts used in valuation models.

Before joining Morningstar in 2008, He performed merger and acquisition advisory work for a middle-market investment bank. Before that, he spent several years at Black & Decker in various operational roles, primarily focused on manufacturing and distribution.

Good holds a bachelor’s degree in business from the University of Tennessee and a master’s degree in business administration from Kenan-Flagler Business School at the University of North Carolina. He also holds the Chartered Financial Analyst® designation.

* Morningstar Holland BV (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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