The energy sector is getting a lot of attention lately as a safe haven that is benefiting from recor...
Exxon & Total: Strong Buys in the Energy Patch
05/03/2017 2:50 am EST
Growth and income expert Crista Huff has reiterated her strong buy recommendations for two leading global oil stocks; here's her update from Cabot Undervalued Stock Advisor.
ExxonMobil (XOM) reported first quarter 2017 earnings per share of $0.95 today, when analysts were expecting $0.85.
The quarter’s successes were led by rising oil prices and cost reductions. Revenue was $63.29 billion vs. the consensus estimate of $64.73 billion.
XOM offers investors aggressive earnings growth, a low P/E, low debt levels and an attractive dividend yield. It announced a modest quarterly dividend increase on April 27, from $0.75 to $0.77 per share. XOM now yields 3.7%.
After a quick run-up to $92 in December, the share price receded to $81 in February, and has since been trading sideways.
Given a stable or bullish stock market, I expect XOM to rebound to $92 this year, offering new investors a potential 14% total return this year. We rate the stock a Strong Buy.
Total S.A. (TOT) reported first quarter results on April 27. Earnings per share were $1.01 (U.S. dollars, not euros), when analysts were expecting an average of $0.95 to $0.96 EPS.
The quarter was characterized by good operational performance, higher commodity prices and lower production costs.
Free cash flow of $1.7 billion rose to a six-year high, and fully covered the dividend, which the market was not expecting. The yield varies; it is approximately 4.2%.
Total’s long-term debt ratio decreased from 27.1% in the fourth quarter of 2016 to 22.7% in the first quarter of 2017, due to the $3.2 billion sale of Atotech. (I consider 23% to be a relatively low number.)
TOT is a greatly undervalued, aggressive growth stock. The share price rose past its recent trading range in early April, and continues to ratchet upwards.
I expect the stock to produce very attractive returns for investors going forward. We rate the stock a Strong Buy and recommend purchase now.
Related Articles on ENERGY
Like many stocks in the energy sector, master limited partnerships, or MLPs, remain out of favor. Th...
My top pick for high quality among infrastructure MLPs is Antero Midstream Partners (AM). The frac w...
My favorite MLPs come from the Plains “family” of master limited partnerships – th...