We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
ExxonMobil After Q4 Earnings: Should You Hold the Stock or Sell it?
Read MoreHide Full Article
Last Friday, Exxon Mobil Corporation (XOM - Free Report) reported fourth-quarter 2024 earnings that exceeded expectations, driven by stellar production from Guyana and Permian, contributing to a strong business outlook.
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
Before analyzing the factors driving this positive outlook, let’s first review the fourth-quarter results.
XOM’s Q4 Earnings Snapshot
ExxonMobil reported earnings per share of $1.67 (excluding identified items), which beat the Zacks Consensus Estimate of $1.55. The bottom line, however, declined from the year-ago level of $2.48.
Total quarterly revenues of $83.4 billion missed the Zacks Consensus Estimate of $87.1 billion. The top line also decreased from the year-ago figure of $84.3 billion. For more details, read our blog: ExxonMobil's Q4 Earnings Top Estimates on Higher Production.
Chevron Corporation (CVX - Free Report) and BP plc (BP - Free Report) are two other prominent integrated energy companies. While Chevron has already announced its earnings, BP has yet to release its report.
Permian & Guyana: Twin Engines of ExxonMobil’s Expansion
With a strong focus on strengthening its presence in the Permian, ExxonMobil completed the acquisition of Pioneer Natural Resources Company on May 3, 2024. With 1.4 million net acres of the combined company in the Delaware and Midland basins, having an estimated 16 billion barrels of oil equivalent resource, ExxonMobil has greatly transformed its upstream portfolio.
Based on 2024 volumes, the company expects its production from the most prolific basin to increase significantly to 2.3 million barrels of oil equivalent per day (MMBoE/D) by 2030, thanks to the improved drilling & production techniques.
Similar to its operations in the Permian, ExxonMobil boasts a robust project pipeline in offshore Guyana resources. Notably, Guyana operations have achieved a production rate of 650,000 barrels per day within just 10 years of the initial oil discovery.
Thus, the integrated energy giant is well-positioned to generate significant returns from both the Permian and Guyana due to low production costs in these assets. With oil prices remaining favorable this year, ExxonMobil is poised to generate substantial cash flows from its upstream operations, which contribute the majority to its total earnings.
XOM’s Low-Carbon and Innovation Initiatives
XOM is investing significantly in low-carbon initiatives, including a hydrogen facility with zero carbon emissions and extensive carbon capture and storage (CCS) projects. These efforts reflect XOM’s dedication to diversifying its portfolio and advancing energy solutions for a sustainable future.
With its integrated business model, ExxonMobil is well protected when oil price turns low. This is because, apart from exploration and production activities, the company has an extensive footprint in refining and chemical businesses.
Also, during uncertain times, ExxonMobil can rely on its robust balance sheet. Compared to the industry’s composite stocks, XOM maintains a much lower debt-to-capitalization ratio. Favorable commodity prices have enabled it to enhance its financial position and repay the debt incurred during the pandemic.
What Should Investors' Position Be for XOM?
In addition to its traditional upstream and downstream energy operations, ExxonMobil is entering the lithium market, a critical component in electric vehicle batteries. The company has announced new equity partnerships and off-take agreements, highlighting the growing market demand for lithium. This move aligns with ExxonMobil’s strategy to diversify beyond traditional oil and gas. By leveraging its expertise in large-scale resource extraction, ExxonMobil aims to establish a competitive position in the lithium supply chain, supporting the global energy transition.
The positive developments have led the stock to gain 9.1% in the past year, outpacing the almost 5% improvement of the composite stocks belonging to the industry.
One-Year Price Chart
Image Source: Zacks Investment Research
With the price increase, the integrated energy giant is appearing relatively overvalued. The stock is trading at a 6.76x trailing 12-month Enterprise Value to Earnings Before Interest, Taxes, Depreciation and Amortization (EV/EBITDA), which is at a premium compared with the broader industry average of 3.93x.
Image Source: Zacks Investment Research
This generally ensures that investors are willing to pay a premium—meaning they are paying more than what traditional valuation metrics suggest the stock is worth. This premium may indicate that investors are optimistic about ExxonMobil’s future growth and market position, which they believe justify the higher price.
Before buying the stock, investors should weigh a few considerations. For instance, ExxonMobil faces significant risks in its aggressive expansion plans. The projected increase in capital expenditure to $28 billion to $33 billion per year from 2026 to 2030 could strain financial flexibility, particularly in a volatile market.
Also, execution risks in major deepwater and LNG projects, especially in politically sensitive regions like Mozambique, pose potential delays and cost overruns. Additionally, maintaining cost efficiency amid these capital-intensive projects remains a challenge that could adversely impact profitability if market conditions shift unexpectedly.
However, the company’s overall outlook remains positive. XOM’s short-term Wall Street average price target is 21.2% higher than the last closing price of $107.09, with the highest target set at $147, representing a potential upside of 37.3%.
Image Source: Zacks Investment Research
As a result, existing investors should hold onto their shares to benefit from this upward price trend. However, for those considering a new investment in ExxonMobil, this might not be the best time. The stock, carrying a Zacks Rank #3 (Hold), is currently overvalued, so it’s wiser to wait for a more favorable entry point before investing. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
ExxonMobil After Q4 Earnings: Should You Hold the Stock or Sell it?
Last Friday, Exxon Mobil Corporation (XOM - Free Report) reported fourth-quarter 2024 earnings that exceeded expectations, driven by stellar production from Guyana and Permian, contributing to a strong business outlook.
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
Before analyzing the factors driving this positive outlook, let’s first review the fourth-quarter results.
XOM’s Q4 Earnings Snapshot
ExxonMobil reported earnings per share of $1.67 (excluding identified items), which beat the Zacks Consensus Estimate of $1.55. The bottom line, however, declined from the year-ago level of $2.48.
Total quarterly revenues of $83.4 billion missed the Zacks Consensus Estimate of $87.1 billion. The top line also decreased from the year-ago figure of $84.3 billion. For more details, read our blog: ExxonMobil's Q4 Earnings Top Estimates on Higher Production.
Chevron Corporation (CVX - Free Report) and BP plc (BP - Free Report) are two other prominent integrated energy companies. While Chevron has already announced its earnings, BP has yet to release its report.
Permian & Guyana: Twin Engines of ExxonMobil’s Expansion
With a strong focus on strengthening its presence in the Permian, ExxonMobil completed the acquisition of Pioneer Natural Resources Company on May 3, 2024. With 1.4 million net acres of the combined company in the Delaware and Midland basins, having an estimated 16 billion barrels of oil equivalent resource, ExxonMobil has greatly transformed its upstream portfolio.
Based on 2024 volumes, the company expects its production from the most prolific basin to increase significantly to 2.3 million barrels of oil equivalent per day (MMBoE/D) by 2030, thanks to the improved drilling & production techniques.
Similar to its operations in the Permian, ExxonMobil boasts a robust project pipeline in offshore Guyana resources. Notably, Guyana operations have achieved a production rate of 650,000 barrels per day within just 10 years of the initial oil discovery.
Thus, the integrated energy giant is well-positioned to generate significant returns from both the Permian and Guyana due to low production costs in these assets. With oil prices remaining favorable this year, ExxonMobil is poised to generate substantial cash flows from its upstream operations, which contribute the majority to its total earnings.
XOM’s Low-Carbon and Innovation Initiatives
XOM is investing significantly in low-carbon initiatives, including a hydrogen facility with zero carbon emissions and extensive carbon capture and storage (CCS) projects. These efforts reflect XOM’s dedication to diversifying its portfolio and advancing energy solutions for a sustainable future.
With its integrated business model, ExxonMobil is well protected when oil price turns low. This is because, apart from exploration and production activities, the company has an extensive footprint in refining and chemical businesses.
Also, during uncertain times, ExxonMobil can rely on its robust balance sheet. Compared to the industry’s composite stocks, XOM maintains a much lower debt-to-capitalization ratio. Favorable commodity prices have enabled it to enhance its financial position and repay the debt incurred during the pandemic.
What Should Investors' Position Be for XOM?
In addition to its traditional upstream and downstream energy operations, ExxonMobil is entering the lithium market, a critical component in electric vehicle batteries. The company has announced new equity partnerships and off-take agreements, highlighting the growing market demand for lithium. This move aligns with ExxonMobil’s strategy to diversify beyond traditional oil and gas. By leveraging its expertise in large-scale resource extraction, ExxonMobil aims to establish a competitive position in the lithium supply chain, supporting the global energy transition.
The positive developments have led the stock to gain 9.1% in the past year, outpacing the almost 5% improvement of the composite stocks belonging to the industry.
One-Year Price Chart
With the price increase, the integrated energy giant is appearing relatively overvalued. The stock is trading at a 6.76x trailing 12-month Enterprise Value to Earnings Before Interest, Taxes, Depreciation and Amortization (EV/EBITDA), which is at a premium compared with the broader industry average of 3.93x.
This generally ensures that investors are willing to pay a premium—meaning they are paying more than what traditional valuation metrics suggest the stock is worth. This premium may indicate that investors are optimistic about ExxonMobil’s future growth and market position, which they believe justify the higher price.
Before buying the stock, investors should weigh a few considerations. For instance, ExxonMobil faces significant risks in its aggressive expansion plans. The projected increase in capital expenditure to $28 billion to $33 billion per year from 2026 to 2030 could strain financial flexibility, particularly in a volatile market.
Also, execution risks in major deepwater and LNG projects, especially in politically sensitive regions like Mozambique, pose potential delays and cost overruns. Additionally, maintaining cost efficiency amid these capital-intensive projects remains a challenge that could adversely impact profitability if market conditions shift unexpectedly.
However, the company’s overall outlook remains positive. XOM’s short-term Wall Street average price target is 21.2% higher than the last closing price of $107.09, with the highest target set at $147, representing a potential upside of 37.3%.
As a result, existing investors should hold onto their shares to benefit from this upward price trend. However, for those considering a new investment in ExxonMobil, this might not be the best time. The stock, carrying a Zacks Rank #3 (Hold), is currently overvalued, so it’s wiser to wait for a more favorable entry point before investing. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.