Imperial Oil downgraded to Underweight from Neutral at JPMorgan

JPMorgan analyst John Royall downgraded Imperial Oil (IMO) to Underweight from Neutral with an unchanged price target of C$100. The firm says that while the company’s Canadian peers are just now returning 100% of free cash flow back to shareholders, Imperial has returned 90% of combined free cash flow from 2022 to 2024 back to shareholders over the three-year span, including three separate substantial issuer bids, the analyst tells investors in a research note. However, the firm thinks the company’s cash balances will be insufficient to support an additional substantial issuer bid through the end of the first half of 2025, making Imperial a relatively less attractive return of capital story versus its 100% returning peers through the end of 2025. Additionally, the company is now increasing capex in 2025 versus the prior long-term guidance of a step-down starting next year, which “should bear fruit longer term but could further constrain capital returns during the investment period,” contends JPMorgan. The firm views the stock’s valuation as the most expensive in the Canadian group.