Making Sense of ExxonMobil’s Newly Added Risk Factors

ExxonMobil (XOM) is an American oil and gas company. It operates through three segments, namely Upstream, Downstream, and Chemical. The Upstream division produces crude oil and natural gas. The Downstream unit manufactures petroleum products. The Chemical segment provides petrochemicals.

For Q4 2021, ExxonMobil reported revenue of $85 billion, which increased from $46.5 billion in the same quarter the previous year but fell short of the consensus estimate of $90.2 billion. It posted adjusted EPS of $2.05, which rose from $0.03 in the same quarter the previous year and beat the consensus estimate of $1.84.

The company plans to distribute a quarterly dividend of $0.88 per share on March 10. XOM stock currently offers a dividend yield of 4.57%, compared to the sector average of 2.9%.

ExxonMobil recently launched a $10 billion share repurchase program that it plans to execute over the next 12 to 24 months.

With this in mind, we used TipRanks to take a look at the newly added risk factors for ExxonMobil.

Risk Factors

According to the new TipRanks Risk Factors tool, ExxonMobil’s main risk category is Macro and Political, with 8 of the total 27 risks identified for the stock. Production and Ability to Sell are the next two major risk categories with 4 risks each. ExxonMobil recently updated its profile with five new risk factors.

ExxonMobil informs investors that it has set up a Low Carbon Solutions (LCS) business unit as part of its efforts to reduce greenhouse gas emissions. Through the LCS unit, the company aims to develop carbon capture and storage technologies, advanced biofuels, and energy efficiency processes. In addition to its in-house R&D efforts, ExxonMobil is collaborating with leading universities and commercial partners under its LCS program. It cautions that the success of the LCS business will partly depend on the success of its collaboration efforts.

The company tells investors that climate change concerns have resulted in regulatory measures and political actions that could harm its business. It mentions that efforts to reduce greenhouse gas emissions have led to government actions such as carbon taxes and renewable energy usage requirements. It also explains that political actors have sought to reduce the availability of financing and investment for oil and gas companies. ExxonMobil cautions that changing climate regulations and policies could reduce the demand for some of its products and increase its compliance costs.

Analysts’ Take

Yesterday, Credit Suisse analyst Manav Gupta maintained a Hold rating on ExxonMobil stock but raised the price target to $90 from $85. Gupta’s new price target suggests 18.73% upside potential.

Consensus among analysts is a Moderate Buy based on 9 Buys and 9 Holds. The average ExxonMobil price target of $84.89 implies 11.99% upside potential to current levels.

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