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ExxonMobil (XOM) Eyes Advanced Elastomer Systems Divestment

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Exxon Mobil Corporation (XOM - Free Report) is looking for options to divest the Advanced Elastomer Systems (AES) division, per Reuters. The company has reportedly hired Morgan Stanley (MS - Free Report) , a leading financial service holding company, to seek potential acquirers.

AES provides thermoplastic elastomers, which have massive demand in the automotive industry, and consumer and industrial products’ markets. The divestment move is expected to value the unit together with its debt at $800 million, per Reuters. It can help the energy giant to reduce debt load. At the end of fourth-quarter 2020, the company’s total debt amounted to $67.6 billion.

Thermoplastic elastomers developed by ExxonMobil’s Newport, Wales plant are known as Santoprene. The AES Newport unit has a production capacity of 50,000 tons of thermoplastic elastomers per year. The AES business was created in 1991, in which ExxonMobil became the stand-alone owner in 2002.

It is currently streamlining the business via focusing more on core operations. Overall, the company is taking efforts to preserve shareholders’ capital, while lowering costs and emissions. It has chalked out a plan to lower greenhouse gas emissions over the next five years after the leading integrated energy firm was repeatedly targeted by activist investors over climate change concerns.

The new 2025 targets comprise plans to cut the intensity of emissions from upstream operations by 15-20% from 2016 levels. Over the five-year span, the company will also reduce methane intensity by 40-50% and flaring intensity by 35-45%. The target of elimination of routine flaring in the next decade is another plan that the energy giant will align with the initiative of World Bank.

Price Performance

The stock has gained 62.9% in the past six months compared with 46% rise of the industry it belongs to.

Zacks Rank & Other Stocks to Consider

The company currently sports a Zacks Rank #1 (Strong Buy). Other top-ranked players in the energy space include Covanta Holding Corporation (CVA - Free Report) and Equinor ASA (EQNR - Free Report) , each having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CrossAmerica’s bottom line for first-quarter 2021 is expected to surge 166.7% year over year.

Covanta Holding’s bottom line for 2021 is expected to surge 109.5% year over year.

Equinor’s bottom line for first-quarter 2021 is expected to rise 111.8% year over year.

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