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XOM
XOM, oil price rebound
🎯 ⛽️ 📈 $100
Last 12 months free cashflow -$2,044m ⬇️
August 21st, 2020
⏰ 1 minute read
⏰ 1 minute read
Sales
Sales fell a whopping -52% in 2Q compared to a year ago, the sixth consecutive quarter of negative growth. As oil prices collapsed, upstream sales were down by -33%, while the more sensitive downstream was down by -55%. We expect oil prices to recover leading to a return to sales growth of +2.3% in the next 12 months to $211bn.
Cashflow
With the decline in sales, operating cash flow ex. working capital fell to zero & despite lower investment spending, 2Q free cashflow was negative -$5,081m, dragging the 12 month average to -$511m. With our forecast rebound in sales & with much lower investment spending expected, we predict the next 12 months cashflow will average a positive again, $3,777bn per quarter.
Sales fell a whopping -52% in 2Q compared to a year ago, the sixth consecutive quarter of negative growth. As oil prices collapsed, upstream sales were down by -33%, while the more sensitive downstream was down by -55%. We expect oil prices to recover leading to a return to sales growth of +2.3% in the next 12 months to $211bn.
Cashflow
With the decline in sales, operating cash flow ex. working capital fell to zero & despite lower investment spending, 2Q free cashflow was negative -$5,081m, dragging the 12 month average to -$511m. With our forecast rebound in sales & with much lower investment spending expected, we predict the next 12 months cashflow will average a positive again, $3,777bn per quarter.
Sales to recover, investment spending cut, debt decline, shares back to $100...
Balance sheet
The balance sheet has been in net debt became of previous large investments & dividends. Became of the negative cashflow now, net debt climbed to a new high of $56.9bn in the 2Q ending the years of capital payouts. We expect capital payouts to resume with higher sales & net debt to decline to $46.6bn in the next 12 months.
Profit
Because of lower sales, net profit turned to a loss for the second quarter in a row & only the second loss the last 5 years. The cash cost ratio, net profit add depreciation minus sales as % of sales is stable, 86.8% the last 12 months. We use 1Q’s 86.7% to get a next 12 months profit $7.5bn, +6.8%.
Value
XOM current market value is at $175bn. That’s 0.83X our sales forecast, 0.5X the value of the total assets & 0.92X the equity with a profitability of 4%. That’s very cheap. Yield is forecast at 2.7%. We use our 1.6% cashflow valuation with a 55% discount because of the large debt which gives a much higher target price of $100.
The balance sheet has been in net debt became of previous large investments & dividends. Became of the negative cashflow now, net debt climbed to a new high of $56.9bn in the 2Q ending the years of capital payouts. We expect capital payouts to resume with higher sales & net debt to decline to $46.6bn in the next 12 months.
Profit
Because of lower sales, net profit turned to a loss for the second quarter in a row & only the second loss the last 5 years. The cash cost ratio, net profit add depreciation minus sales as % of sales is stable, 86.8% the last 12 months. We use 1Q’s 86.7% to get a next 12 months profit $7.5bn, +6.8%.
Value
XOM current market value is at $175bn. That’s 0.83X our sales forecast, 0.5X the value of the total assets & 0.92X the equity with a profitability of 4%. That’s very cheap. Yield is forecast at 2.7%. We use our 1.6% cashflow valuation with a 55% discount because of the large debt which gives a much higher target price of $100.
