In the note, the analyst firm downgraded the energy sector to "marketweight" from "overweight," and said that it prefers big, lower beta stocks like Exxon Mobile for exposure in the sector. The downgrade follows OPEC's decision to maintain its production targets.
The firm said it expects Brent crude oil to be between $70 and $75 a barrel in 2015 due to OPEC's decision. Bank of America/Merrill Lynch said that WTI could fall as low as $50 in the coming months, warning that "volatility in oil prices translates to volatility in earnings."
TheStreet Ratings team rates EXXON MOBIL CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate EXXON MOBIL CORP (XOM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, growth in earnings per share, increase in net income, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- EXXON MOBIL CORP has improved earnings per share by 5.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, EXXON MOBIL CORP reported lower earnings of $7.37 versus $9.70 in the prior year. This year, the market expects an improvement in earnings ($7.54 versus $7.37).
- The net income growth from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income increased by 2.5% when compared to the same quarter one year prior, going from $7,870.00 million to $8,070.00 million.
- XOM's debt-to-equity ratio is very low at 0.12 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that XOM's debt-to-equity ratio is low, the quick ratio, which is currently 0.55, displays a potential problem in covering short-term cash needs.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.4%. Since the same quarter one year prior, revenues slightly dropped by 4.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full analysis from the report here: XOM Ratings Report