Just Because You Are Big Doesn’t Mean You Are the Bomb
There are many extremely large companies who seem to get credit as being the best. In the case of Exxon, analysts are aware that they are one of the largest, but are they the greatest? Good question! The Street explains why Exxon may not be the best.
In downgrading Exxon to hold from buy on Tuesday, Weiss wrote of what could be a cash crunch for a company that just made over $9 billion in the fourth quarter, “If there is a shortfall, the strength of the balance sheet should allow Exxon to borrow whatever might be necessary. However, we do not expect it to generate enough cash to fund its capex budget as well as its share repurchase and dividend activity.”
The shift in outlook on Exxon Mobil is notable. “The opinion is one that’s been building over time. It kind of reached a tipping point yesterday as I looked through the data and heard the responses the company gave to analyst questions,” Weiss said in an email.
Exxon Mobil has an annual spending plan of at least $33 billion to $37 billion until 2015.
There are simply better options in the Big Oil peer universe, in the analyst’s opinion: Exxon Mobil has trailed Chevron (CVX) for 10 consecutive quarters when ranked based on profit per barrel of oil.
Exxon may have to step up their game if their competitors and doing the same. This is a good lesson to be learned here. Even if a company is the biggest, there are still questions to be raised. Be sure to do your due diligence, even on the well known big dog companies.
Quotes taken from report by The Street, Read the entire article here.
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