RBC Capital has moved Imperial Oil Ltd. (NYSE:IMO) (TSE:IMO) from a Sector Perform rating to Underperform and assigned a price target of C$116.00. The firm said the decision reflects a disconnect between the recent relative performance of Imperial Oil’s shares and the company’s underlying fundamentals.
The research note highlighted that Imperial Oil’s stock has rallied 77% over the prior 12 months and currently trades at $120.69, close to its 52-week high of $123.52. The equity carries a price-to-earnings ratio of 25.92. According to InvestingPro analysis cited in the note, the shares appear overvalued relative to their Fair Value and are listed among companies on the Most Overvalued list.
RBC Capital said the downgrade was driven by the expectation that higher relative returns may be available in other opportunities, rather than by a change in its view of Imperial Oil’s underlying business quality.
Despite the rating change, the analyst kept a fundamentally constructive stance on the company’s operating profile. RBC noted Imperial Oil’s experienced leadership team and described its upstream portfolio as long-life with low decline rates. The firm also pointed to the company’s cash flow diversification coming from its refining and chemical businesses as a stabilizing factor.
The research note reiterated positives including a strong balance sheet and robust free cash flow generation. RBC emphasized the company’s commitment to returning capital to shareholders; an InvestingPro tip referenced in the note states Imperial Oil has increased its dividend for 30 consecutive years and the current yield is 2.11%.
RBC also flagged solid operating performance as a favorable element in the company’s profile.
On the results front, Imperial Oil reported fourth-quarter 2025 earnings per share of $1.97, exceeding analyst expectations of $1.94. Revenue for the quarter came in at $11.28 billion, however, missing the forecast of $12.59 billion by roughly 10.41%.
Separately, Raymond James has revised its price target on Imperial Oil to C$107.00 from C$106.00 but reiterated an Underperform rating. Raymond James noted that the stock trades about 21% above their target price, underscoring valuation concerns raised by multiple brokerages.
Taken together, the brokerage actions and the mixed quarterly metrics underscore a tension between Imperial Oil’s operational strengths and investor concerns about the current share price level.