Exxon Stock Remains Unfazed by $5 Billion Damages Verdict

Strategic Insights -

The federal court ruling against Exxon Corporation for the Valdez oil spill has had a minimal impact on the company's stock, with shares closing trading Monday at $59.87, down only 38 cents from Friday's close. Analysts predict that the $5 billion punitive damages award may be reduced on appeal or through negotiations, as the company had already discounted its share price earlier this year to account for most of the potential damage. Industry observers expect the figure to drop in the coming months as the case is reviewed by a federal judge.

Key Takeaways:

  • Exxon stock closed trading Monday at $59.87/share, down only 38 cents from Friday's close, despite the $5 billion punitive damages award.
  • Analysts believe the amount Exxon pays in the end could be reduced on appeal or through negotiations, citing the company's prompt response to the spill and previous settlements.
  • The company's stock had already discounted its share price earlier this year to compensate for most of the potential damage, with some analysts suggesting this had overestimated the litigation risk.
  • Industry observers expect the $5 billion punitive damages award to be significantly reduced in the coming months during review by a federal judge.
  • Exxon faces three options for reducing the $5 billion sum: appealing the case, settling out of court, or filing post-verdict motions with the federal judge.
  • Analysts such as Michael Young of Smith Barney Inc. and Michael Mayer of Wertheim Schroder & Co. maintain their recommendations on Exxon stock and operating earnings estimates for 1994 and 1995.

Statistics:

  • Exxon stock closed trading Monday at $59.87/share, down 38 cents from Friday's close.
  • The company's stock had already discounted its share price earlier this year, with shares selling for around $57 in July.
  • Industry analysts estimate Exxon's operating earnings for 1994 and 1995 to be $3.40/share and $4.15/share, respectively.
  • The company has spent $2.5 billion on cleanup and compensation for the oil spill, and has also settled with the federal and Alaska state governments for $1 billion.
  • Exxon has until Sept. 30 to file post-verdict motions with the federal judge asking for a reduction of punitive damage awards.

Sources:

  • "Exxon Stock Remains Unfazed by $5 Billion Damages Verdict," _Reuters,_ Sep 19, 1994
  • "Exxon Corporation," _Smith Barney Inc.,_ Sep 19, 1994
  • "Exxon Corp. Maintains Price After $5B Verdict," _Wall Street Journal,_ Sep 19, 1994