Jim Cramer says 'everything is going right' for Exxon Mobil and recommends buying on a dip

Published Mon, Jul 12 202111:49 AM EDTUpdated Mon, Jul 12 20213:02 PM EDT

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

CNBC's Jim Cramer said Monday that he's come around on the idea of owning Exxon Mobil shares, citing a number of positive catalysts including the recent board shake-up driven by climate-focused activist investors. "If this stock comes down, I want to use this as a reason to buy," Cramer said on "Squawk on the Street," after discussing a new report from BMO Capital Markets analysts. On Monday, the firm initiated coverage of the oil giant with a market perform rating, which is akin to a hold. "We currently see valuation, ability to increase cash returns, and cash flow leverage to higher oil prices as less attractive than Chevron or Conoco," the analysts wrote. "That said, we like Exxon's leading upstream pipeline, which advantages it long term, and we could get more constructive on shares with a pullback." Shares of Exxon traded around $61 apiece Monday. BMO put a price target of $69 on the stock. While BMO's piece is titled "Exxon Mobil: Don't Call It a Comeback," Cramer said it sounds "like a comeback story." "Everything is going right for them. The dividend is secure," Cramer said. "They've got Permian foundational. This Guyana asset is terrific. The board is moving forward for ESG, which I like very much. … They have chemical [margins at] a 10-year high." The "Mad Money" host has largely eschewed oil and gas stocks lately, primarily citing poor performance even before the Covid pandemic struck. Part of the reason why the stocks had struggled, Cramer has said, is concern about climate change from a segment of investors who do not want to own the companies. However, energy has been the best-performing sector in the S & P 500 so far this year, rising about 39%, as Wall Street rotated toward economically sensitive industries that stand to benefit from the U.S. economic expansion. Exxon shares, in particular, are up 48% year to date. Exxon and its peer companies had been hit hard by the coronavirus pandemic, as travel and, by extension, demand for oil, plummeted. Now, a major recovery is afoot, and crude prices are rising to the benefit of producers. Cramer has spoken favorably of some fossil fuel stocks in recent months. In early June, he said Pioneer Natural Resources and Chevron "have heeded the call" to improve their environmental impact. "They recognized that their old ways are no good, and they're becoming better corporate citizens," Cramer contended. At the time, he hinted his attitude toward Exxon was improving due to activist firm Engine No. 1 securing multiple board seats at the company . Engine No. 1 argued Exxon needed to adjust its operations and reduce its carbon emissions to ensure the company has long-term financial viability. "This is, to me, a great story with the new board," Cramer said of Exxon.

An ExxonMobil refinery in Baton Rouge, Louisiana.

Kathleen Flynn | Reuters