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Exxon, Chevron to Benefit From Clean Energy: Morgan Stanley

Morgan Stanley says it’s not just renewable energy companies that will benefit from  decarbonization efforts to be discussed this week.
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Morgan Stanley says it’s not just renewable-energy companies that will benefit from the decarbonization efforts to be addressed at this week’s UN climate change summit.

Fossil fuel companies, such as Exxon Mobil  (XOM) - Get Exxon Mobil Corporation Report, Chevron  (CVX) - Get Chevron Corporation Report and ConocoPhillips  (COP) - Get ConocoPhillips Report will benefit, too, the investment bank’s analysts wrote in a report cited by MarketWatch.

So how did those names make the Morgan Stanley list? They are getting into renewable energy and carbon capture, utilization and storage, the bank points out.

To be sure, its list includes “cleaner” companies as well, such as Sunrun  (RUN) - Get Sunrun Inc. Report, SolarEdge Technologies  (SEDG) - Get SolarEdge Technologies, Inc. Report, Tesla  (TSLA) - Get Tesla Inc Report and QuantumScape  (QS) - Get QuantumScape Corporation Class A Report.

Decarbonization means trouble for Continental Resources  (CLR) - Get Continental Resources, Inc. Report, Nabors Industries  (NBR) - Get Nabors Industries Ltd. Report, Ford Motor  (F) - Get Ford Motor Company Report, and American Airlines  (AAL) - Get American Airlines Group, Inc. Report, Morgan Stanley said.

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Exxon Mobil on Monday closed at $65.63, up 1.8%. It has climbed 12% in the past month amid rising oil prices.

Morningstar analyst Allen Good puts fair value for Exxon Mobil at $74 and assigns the company a narrow moat.

“We think Exxon's recovery from a very tough 2020 remains in the early stages,” he wrote Friday. “Although earnings have improved and debt levels fallen, it has further to go.

“The downstream continues to underearn as margins remain below 10-year average ranges, while all other commodity price indicators have recovered, suggesting further earnings potential.

“Continued high commodity prices should allow for more debt reduction and potentially greater shareholder returns (dividend increases and repurchases). Exxon also remains our cheapest integrated oil based on price/fair value. …

“ExxonMobil remains committed to oil and gas, [though] it has … announced emission reduction targets.”