Goldman downgrades Exxon to 'sell', slashes returns outlook

LONDON (Reuters) – Goldman Sachs (NYSE:) downgraded ExxonMobil (N:) to “sell” following disappointing fourth-quarter results, as the Wall Street bank forecasted the oil and gas company will meet only half of its targeted returns by 2025.

Irving, Texas-based Exxon’s results missed Wall Street’s recently lowered estimates, with earnings sliding to $5.6 billion from $6 billion a year ago as weak oil and gas prices, sliding refining and chemicals profit margins offset a sharp increase in oil and gas production.

Exxon CEO Darren Woods described the margin weakness as “a short-term impact”.

But Goldman said its decision to downgrade Exxon from “neutral” stemmed from “lack of free cashflow limiting capital returns, and risk to long-term return on capital employed (ROCE)targets”.

Goldman said it saw “clear downside” to Exxon’s target of reaching 15% ROCE by 2025, with its own modelling now showing 8% ROCE due to lower downstream margins, lower prices and risks to execution of projects.

Goldman lowered Exxon’s share price target from $72 to $59. Exxon shares closed at $62.1 on Friday.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.