The shares of Exxon Mobil (NYSE: XOM) ended the session on Friday at around $77.28, down by 0.87 percent. The company’s shares plunged along with the prices of crude oil.
According to Goldman Sachs analysts, they are anticipating that the price of oil will decline further after the decision of the OPEC not to decrease its output during the organization’s recent meeting.
The investment banking firm is standing by its forecast that the price of oil will slump to $20 per barrel—a level which Goldman said that oil firms should perform production cuts in order to minimize their losses.
WTI crude dipped below its 7-year low of $34.50, before surging to end the session at $34.56 a barrel, down by 1.12 percent. Meanwhile, Brent crude for January delivery plunged by 1.08 percent to $36.66 per barrel.
Some analysts have given Exxon Mobil Corp. a Hold rating due to several mixed factors. Some of these major factors indicate weakness on the stock, while others have shown strength. Because of this, there is very little evidence that will justify the anticipation of a negative or positive stock performance compared to other stocks.
The strength of Exxon Mobil lies in numerous areas, such as its strong financial position, good valuation levels, as well as low levels of debt. On the other hand, the firm’s weaknesses lied on its downbeat return on equity, lackluster stock performance, as well as disappointing operating cash flow.
In terms of Exxon Mobil Corp’s debt-to-equity ratio, it currently stands at 0.20, which can be considered very low. This figure is lower than that of the industry average, suggesting that the firm’s management was able to implement effective measures to manage their levels of debt. However, despite the fact that Exxon has a favorable debt-to-equity ratio, its quick ratio which posts at 0.48 can be considered extremely weak. Furthermore, this number suggests that the company does not have the ability to pay its short-term obligations.
With Exxon’s revenue decline, the firm has underperformed the industry average of 36.8 percent by a bit. Since the same period in the previous year, the revenues of Exxon dropped by 37.4 percent. Because of these downbeat levels of revenue, the company’s bottom line has somehow been hurt, as shown by its decline in earnings per share.
Compared to the return on equity during the year-ago quarter, the present ROE is lower. With this, it implies that there is some weakness within Exxon Mobil Corp. When compared to other firms under the Oil, Gas & Consumable Fuels industry, Exxon outperformed the industry average. On the other hand, when compared to the overall market, the company has underperformed relative to the Standard & Poor’s 500.
Meanwhile, in terms of the share price of Exxon Mobil, it has not performed very well. The XOM shares edged lower by 14.64 percent and have underperformed the S&P 500. This partly reflects the continuously dropping earnings per share in comparison to the same quarter in the prior year. According to analysts, the fact that the XOM stock is currently selling for less than its peers in the industry relative to its present earnings is not sufficient reason to justify a Buy rating at this point in time.