NEW YORK (TheStreet) -- Exxon Mobil (XOM) shares are down -0.8% to $101.78 on Friday following a report on the company's planned $1 billion investment to increase diesel fuel production at its refinery in Antwerp, Belgium, according to the New York Times.
The investment is a long-view bet on diesel production in Europe as Exxon Mobil executives see demand for gasoline decreasing while demand for diesel fuel increases.
More than half of new cars registered in Western Europe were diesel powered compared to 10% in 1990 according to the New York Times. Comparatively, only 3% of new cars in the U.S. are diesel powered
The sizable investment in Europe seems counter intuitive because of the extremely low margins and industrywide losses attributed to excess refining capacity on the continent.
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, good cash flow from operations, increase in stock price during the past year and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has increased to $15,103.00 million or 11.11% when compared to the same quarter last year. Despite an increase in cash flow, EXXON MOBIL CORP's average is still marginally south of the industry average growth rate of 17.65%.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- 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 3.2%. Since the same quarter one year prior, revenues slightly dropped by 2.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: XOM Ratings Report