Is Exxon Mobil A Buy After Q4 Earnings?

Estimated read time 7 min read


Exxon Mobil‘s (XOM) stock has been rising since the beginning of the year, first in response to rising oil prices and then as a reaction to Russia’s attack on Ukraine. But now that the White House has taken aim at Big Oil, is it time to sell XOM or should you wait for yet another recovery and bank on expected profitability and a planned expansion of its refinery business? For the answer, take a look at Exxon’s stock chart.




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Rising inflation and Russia’s invasion had sent oil prices higher, as the West turned away from Russian supply and the markets worried about shipping disruptions.

But U.S. crude oil prices have fallen about 15% since peaking at about $130 on March 7. On Friday, oil prices fell below $111 a barrel. That comes after President Joe Biden blamed oil companies for the rising price of gas. Biden criticized Exxon for not increasing capital expenditures and for keeping the oil supply low and gasoline prices high. The average price of gas across the U.S. Thursday was $5.01, according to AAA data.

“We’re going to make sure that everybody knows Exxon’s profits,” Biden told reporters last week during a visit to Los Angeles. “Exxon made more money than God this year.”

Exxon’s response: “ExxonMobil has been investing more than any other company to develop U.S. oil and gas supplies. This includes investments in the U.S. of more than $50 billion over the past five years, resulting in an almost 50% increase in our U.S. production of oil during this period.”

Many oil stocks had become extended, but since Biden’s comments some of them began to fall, according to MarketSmith chart analysis. And several of them have fallen on uncertainty about the price of oil.

If you bought Exxon when it was near its height of 105, technically IBD’s rule is to sell when it falls 7%-8% below where you bought it. Although, if you bought it when it crossed its buy point of 89.90 off its recent cup-with-handle formation, you may want to hold onto it in the event that Exxon recovers.


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Exxon Stock Fundamental Analysis

Exxon built a huge cash flow and has reinvested that money in its refinery business and in shale deposits. And it increased its annual dividend to $15 billion, or $3.52 per share. Exxon is in a prime spot to give money back to shareholders now and in the future.

Wall Street predictions for XOM’s second-quarter include earnings per share of $2.94 and $91.5 billion in revenue, according to FactSet.

The company earned $8.8 billion in the first quarter, a 218% increase vs. the same period a year ago.

The stock held up despite an earnings miss. Exxon earnings per share jumped to $2.07, while analysts polled by FactSet expected EPS of $2.20.

Revenue beat expectations, though, jumping 53% to $90.5 billion. Wall Street saw $82.838 billion.

The Q1 EPS excludes $3.4 billion, or 79 cents per share, related to Exxon’s planned exit from the Russia Sakhalin-1 project as a result of Ukraine war.

Capital spending totaled $4.9 billion for the quarter, in line with its full-year guidance of $21 billion to $24 billion.

The Future Of Exxon

So far, no major analysts have downgraded Exxon stock. In fact, Goldman Sachs not only maintained its “buy” rating on the stock but increased its target price to 117, although that was on June 8, before Biden’s comments.

Morgan Stanley analyst Devin McDermott estimates that the company may generate $50 billion of free cash flow this year after capital expenditures. That is more than sufficient to cover annual dividends plus $15 billion of anticipated stock repurchases, he said in a note to investors last month.

Exxon has been investing in its refining business, including projects in the Netherlands and Texas, when “many in the industry constrained investment,” McDermott said.

“As the world’s largest refiner & marketer of petroleum products, XOM is an outsized beneficiary relative to integrated peers,” he wrote.

On April 26, Exxon said it hiked its recoverable resource estimate for its Stabroek Block in offshore Guyana to 11 billion oil-equivalent barrels, thanks to three new discoveries at the site. The previous estimate was for 10 billion barrels.

Earlier this year, the oil major also announced it would reorganize into three business units. Under the new structure, the chemicals and refining divisions have been combined into a single reporting segment to cut costs. The company also plans to relocate its headquarters from Irving, Texas, to Houston by mid-2023.


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Oil demand is shrinking in the long term as alternative energy sources take hold. Independent U.S. shale companies are scaling back their spending to keep their balance sheets on positive footing. That leaves the door open for oil majors to take market share.

Exxon has become a bigger shale player, increasing its holdings in the Permian Basin of Texas and New Mexico.

Exxon Stock Technical Analysis

On May 4, Exxon Mobil stock managed to break above a cup-with-handle buy point of 89.90, according to MarketSmith analysis. Since then, the stock has retreated but it’s now back below its buy zone as it fell below its 50-day moving average and 21-day exponential moving average.

Though, the relative strength line is still holding up, an encouraging sign.

XOM stock has a perfect Composite Rating of 99. XOM’s EPS Rating is a low 78, but that partly reflects a loss in 2020.

Improving earnings performance gives added credibility to a bullish outlook on Exxon Mobil stock. And analysts had expected the price of a barrel of oil to skyrocket to as high as $200.

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Rivals are also moving in to expand shale holdings. In July 2020, Chevron announced it was buying Houston-based oil and gas independent producer Noble Energy in an all-stock deal valued at $5 billion. Noble has 92,000 acres in the Delaware Basin of the oil-rich Permian.

And in October 2020, ConocoPhillips (COP) agreed to buy Concho Resources in an all-stock deal valued at $9.7 billion. That created the biggest independent U.S. oil producer.


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Climate-change activists and investors have wanted Exxon to pledge to reduce its emissions to net zero by 2050.

On Jan. 18, Exxon pledged to have net-zero carbon emissions from operations by 2050. But the pledge didn’t include emissions from consumers using oil and other fossil fuels.

Last year, Chevron (CVX) announced it would have net-zero emissions from its upstream operations by 2050. But it stopped short of pledging to hit net zero for all operations.

Is Exxon Stock A Buy?

Last year’s stock action marked a step back for Exxon. The collapse of oil prices from 2014 to 2020 led to Exxon stock losing its status as a Dow Jones Industrial Average listing after 90 years. Exxon was replaced by Salesforce (CRM) in August 2021.

As with other oil stocks to buy and watch, Exxon stock will rise and fall with crude oil prices. So even when Exxon looks good based on fundamentals and technicals, crude oil prices may suddenly plunge, taking XOM stock down, too.

Investors could choose to buy an energy exchange traded fund as a way to play sector moves while avoiding stock-specific risk. Energy Select Sector SPDR Fund (XLE) and the iShares U.S. Energy ETF (IYE) are two energy-related ETFs. But those ETFs are still exposed to crude oil price swings.

Exxon and Chevron are major weights in XLE.

Bottom line: Exxon stock is below its buy zone, and depending on where you bought the stock, it could be in sell range. Still, Exxon has consistently outperformed a turbulent market and could recover from its recent lows.

Investors can check out IBD Stock Lists and other IBD content to find dozens of the best stocks to buy or watch.

Follow Michael Molinski on Twitter @IMmolinski

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