Exxon Mobil (XOM) - Get Report shares extended declines Monday after analysts at Goldman Sachs cut their rating on the biggest U.S. oil producer to "sell", citing what it called "clear downside" risks to the company's near-term targets.
Goldman analyst Neil Mehta also lowered his price target on Exxon by 18%, to $59 per share, following the group's weaker-than-expected fourth quarter earnings report Friday that the analyst argues could test its ability to deliver a 15% return on capital employed by 2025. Mehta sees that return figure at no better than 8%, thanks in part to extended declines for global crude and lower downstream margins for Exxon.
Exxon shares were marked 2% lower by mid-day Monday trading, following on from Friday's 4.1% slide, to change hands at a fresh 9-year low of $60.86 each.
Exxon said Friday that adjusted earnings for the three months ending in December came in at 41 cents per share, down more than 70% from last year and 2 cents shy of the Street consensus forecast as oil majors around the world see profits declining alongside global crude prices.
Net income was pegged at $5.69 billion, the weakest in three years while group revenues fell 6.6% to $67.17 billion .
Exxon's biggest U.S. rival, Chevron Corp. (CVX) - Get Report, also slumped 3.8% to a one-year trough on Friday after weaker-than-expected fourth quarter earnings and pointed questions over the future of carbon-intensive stocks in an increasingly green-focused investment world.
"Exxon's in the fossil fuel business and fossil fuel is the new tobacco," said TheStreet's founder, Jim Cramer. "Managers, and not just young managers, are shedding these stocks regardless of their promise."
"As the selling knocks the stocks down the self-fulfilling index fund right-sizing caused a further decline," he added. "What's really incredible about this divesting is that we are just at the cusp of the effort. It's been mostly smaller funds, so far but they are impacting the stock mightily already."
The S&P 500 Energy Sector Index has fallen some 12.3% over the past six months -- against a 13.38% gain for the broader benchmark -- and earnings from companies within the index are likely to fall 41.6% from the same period last year to just $12.2 billion over the fourth quarter of 2019, making it the weakest of all reporting sectors in the U.S. market.
Brent crude futures contracts for April delivery, the global benchmark for pricing, were last see seen $2.15 lower from their Friday close in New York and trading at $54.47 per barrel, extending the decline from their January 3 peak to 20.5%.
WTI contracts for the same month, which are more tightly-linked to U.S. gasoline prices were seen $1.38 lower at $50.18 per barrel and have fallen nearly 21% over the past month.