For starters, there are many macroeconomic factors to consider. Most Wall Street strategists are forecasting higher price targets for the S&P 500. This rising tide should lift most ships, which would seemingly include Exxon Mobil and rival Chevron Corp. (NYSE: CVX).
The Federal Reserve is about to get a new chairman. It is generally expected that interest rates will rise, but perhaps not to the point that they pressure the stock market and ongoing economic recovery. The world markets are by and large exiting their recessions at the same time that U.S. gross domestic product is expected to tick up.
The outlook for Exxon Mobil is one that investors are examining closely in 2014. Its gain in 2013 was 20%, and its current dividend yield for 2014 is about 2.5%. Shares are now right around the $100 mark, after closing out 2013 at $101.20. The consensus analyst price target is almost $97, and the 52-week trading range is $84.79 to $101.74.
Exxon was actually underperforming in 2013, but the massive stake taken by Warren Buffett really created an excitement in its shares. Goldman Sachs even chased it up higher right at the end of the year, making the gain more than 8% in December.
The bullish case for Exxon Mobil was given a serious boost by Buffett. Another boost is that the world economies are coming back online after recessionary levels were present for too long. Another obvious boost is the energy boom taking place in America, and that could still be just at the rekindling phase. Also, Exxon almost certainly will raise its dividend again, and it is buying back enough stock that it offers support for shareholders. One more thing that may help is that Exxon shares finally pulled back in the opening trading sessions of 2014.
The bearish case for Exxon is almost the 180-degree spin from the bullish/bearish Chevron outlook for 2014. Exxon trades at about 12 times expected 2014 earnings now, and it is also suffering from expected sales declines. Chevron outyields Exxon as well, handily for that matter, at 3.2% versus 2.5%. Exxon is also so much larger than any of the other oil giants that it takes billions of dollars of investor inflows to really move the needle very much. Regulatory pressures can also come back at any given time, such as during a presidential speech, almost without warning.
The 2014 outlook for Chevron puts the smaller of the Dow oil giants in a position for value investors. On the flip side, Buffett did choose Exxon over Chevron. Now ask yourself one more question: Is it mere coincidence that Exxon is moving its personnel out of the surrounding Washington, D.C., area to Houston in droves?
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