Why the Exxon Mobil Stock Price Hit a Fresh 52-Week Low
By Diane Alter, Contributing Writer, Money Morning•
The Exxon Mobil stock price (NYSE: XOM) hit a 52-week low of $84.03 intraday Wednesday. Shares of the oil and gas giant are sitting at their lowest level in 17 months.
The Irving, Texas-headquartered company has certainly taken it on the chin over the last several months. Indeed, a laundry list of issues plague the stock...
It's Not Just Oil Hurting the Exxon Mobil Stock Price
Here's what's weighed on XOM in 2015:
Plunging oil prices: Brent crude oil is trading around $57 a barrel. A year ago, the global benchmark for oil traded at $102.80. West Texas crude is trading at $47.32, down nearly 60% from prices last summer.
Record crude stockpiles: U.S. crude inventories rose by 4.5 million barrels last week, according to government data released Wednesday. The build took U.S. crude stockpiles to 448.9 million barrels through the week ending March 6. That's the highest level on record dating back some 80 years.
A strong dollar: Amid expectations U.S. interest rates will rise midyear, the dollar rose to a 12-year high against the euro Wednesday. The dollar gained 1.6% to $1.0531 against the single currency. The dollar is also at multiyear highs against a number of developed-market currencies. The Swedish krona is off 22% against the dollar since June 30, 2014, according to FactSet. The Japanese yen is 16% lower. The Swiss franc is 11% lower. Oil is priced in dollars. So, a stronger dollar makes oil more expensive to buyers using other currencies.
Increasing global supply: Russia's Energy Minister Alexander Novak told Reuters Wednesday that exports from Russia will rise this year. Russia, one of the world's biggest oil producers, will maintain its crude oil output at more than 10 million barrels per day (bpd) despite some expectations of a plunge in production due to lower prices.
Legendary investor Warren Buffett: Filings released last month revealed the Chief Executive Officer of Berkshire Hathaway Inc. (NYSE: A) sold his entire stake in XOM. The Oracle of Omaha sold 41 million XOM shares in Q4 2014. It was Berkshire's eighth largest stake. Berkshire had been XOM's sixth largest shareholder.
Retreat in the ranks: With a market cap of $353.82 billion, Exxon is among the biggest companies traded on U.S. markets. But XOM has been quickly slipping in the ranks. Last week, Google Inc. (Nasdaq: GOOG, GOOGL), with a market cap of $380.71 billion, passed XOM for the No. 2 spot. This week, $355.44 billion market cap Berkshire Hathaway eked past XOM for the No. 3 spot, just weeks after dumping XOM shares. According to S&P Dow Jones Indexes, the last time XOM finished the year this low in the market-cap rankings was 1999. That year it finished fifth.
Analysts' downgrades: A fresh ETF Channel study of analysts' recommendations at major brokerage houses shows XOM is out of favor. XOM is the No. 30 broker pick (on average) out of the 30 stocks that make up the Dow Jones Industrial Average. XOM also fares poorly when ranked among analysts' picks within the broad-based S&P 500 Index. Here XOM lands at the No. 446 spot.
Despite all these headwinds, here's why XOM stock has better days ahead...
The Exxon Mobil Stock Price Will Head Higher
A new analyst report from Goldman Sachs Group Inc. (NYSE: GS) released Monday could boost the Exxon Mobil stock price. Goldman Sachs resumed coverage of Exxon with a "Buy" rating - and money often follows a GS "Buy" rating. Goldman believes XOM's refining earnings will improve in 2015 and 2016 from 2014 levels.
The firm also noted XOM has plenty of "M&A firepower to fund acquisitions." Strategic buys, some no doubt at fire-sale prices given the oil price plunge, have the potential to boost XOM's exposure to shale production.
Also appealing to investors is Exxon's 3.26% dividend yield. Exxon's dividend payment has grown at an average annual rate of 6.4% over the last 32 years. The company has paid a dividend for 133 consecutive years. That dividend will help boost investor returns until the Exxon Mobil stock price recovers.
Money Morning Technical Trading Strategist D.R. Barton said in January that "Exxon is the place if you're going to go with a big oil company." He cited Exxon's gross margins and efficient use of capital as reasons why it stands out among the big oil companies as a "Buy," especially at current bargain prices.
The Energy Sector Is About to Rebalance... With this rebalance will come a load of opportunities, specifically in the "renewable energy" market. In fact, spending on renewable energy was so strong in 2014 that some have begun to label the recent rush as a "turning point" in the energy balance. Here's how you can get in on the gains...