Stock of the Day

March 31, 2022

ExxonMobil (XOM)

$174.70
-$2.31 (-1.3%)
Market Cap: $733.70B

About ExxonMobil

ExxonMobil Corporation engages in the exploration and production of crude oil and natural gas in the United States and internationally. It operates through Upstream, Energy Products, Chemical Products, and Specialty Products segments. The Upstream segment explores for and produces crude oil and natural gas. The Energy Products segment offers fuels, aromatics, catalysts, and licensing services. It sells its products under the Exxon, Esso, and Mobil brands. The Chemical Products segment manufactures and markets petrochemicals, including olefins, polyolefins, and intermediates. The Specialty Products segment offers performance products, including lubricants, basestocks, waxes, synthetics, elastomers, and resins. The company is also involved in the manufacturing, trade, transport, and selling crude oil, natural gas, petroleum products, petrochemicals, and other specialty products in pursuit of lower-emission business opportunities, including carbon capture and storage, hydrogen, lower-emission fuels, and lithium. Exxon Mobil Corporation was founded in 1870 and is based in Spring, Texas.

ExxonMobil Bull Case

Here are some ways that investors could benefit from investing in Exxon Mobil:

  • Exxon Mobil shares recently surged 1.8% to trade at $177.19, hitting a new 52-week high of $177.43, which signals strong recent momentum and investor confidence in the company's performance.
  • The company demonstrated robust operational efficiency with an 8.9% net margin, which significantly outperforms its main competitor Chevron at 6.7%, indicating a superior ability to convert revenue into profit.
  • Exxon Mobil's chemicals business experienced a sharp recovery, with earnings jumping from $110 million in the first quarter to $1.13 billion in the second quarter, driven by stronger North American feedstock economics.
  • Analysts at Erste Group Bank raised their full-year 2026 earnings per share estimate to $12.56, which is above the current consensus estimate of $12.40, suggesting that the market may be underestimating the company's near-term profitability.
  • The company maintains a resilient dividend profile with a yield of 2.39% and a payout ratio of 53.02%, providing a steady income stream that is supported by its diversified integrated business model.

ExxonMobil Bear Case

Investors should be bearish about investing in Exxon Mobil for these reasons:

  • At a price-to-earnings ratio of 22.80, Exxon Mobil trades at a premium valuation near the broader market average, which may limit upside potential if earnings do not continue to grow at the current pace.
  • There is uncertainty surrounding the Guyana project, as reports suggest the country may scale back its liquefied natural gas plans while Exxon Mobil requires more gas for its wells, creating potential execution and scope risks.
  • Despite a strong second quarter, some analysts expect earnings to decline in the coming periods, raising concerns that the current stock price may already be pricing in much of the recent positive performance.
  • Management's strategic focus appears to be shifting away from the assets emphasized after the Pioneer Natural Resources acquisition, which may create confusion among investors regarding the company's future growth priorities and asset mix.
  • Industry chemical margins remain below the company's historical benchmarks, suggesting that while the recent recovery is positive, the long-term cost advantage in the chemicals sector may be narrowing.

It’s Not Too Late To Buy These Oil Stocks 

Written By Thomas Hughes on 3/3/2022

It’s Not Too Late To Buy These Oil Stocks 

Target These High-Yield Oil Stocks 

If you are wondering where the price of oil is going or it is not too late to buy oil stocks we’re here to tell you that oil prices and the energy complex are going higher, much higher. We think WTI will go well over $130 per barrel and set a new all-time high. It will probably stay at those levels until Russian capacity is either brought back to the market or made up by us or OPEC. We already know that OPEC isn’t going to pump more, they said so, and our energy policy is anti-energy so there is really no ceiling in sight for price action. The worst part of this out is that, historically, any time oil prices correct it is caused by or comes with a recession so there’s that to think about too. Regardless, what this means is windfall profits for the energy sector and there are some high-yielding stocks from which to choose. 

The XLE (NYSE: ARCA) alone is yielding over 3.2% at last glance and the distribution is going to increase as well. Many companies within the sector are well-known dividend increases and no few have a record for special dividends when those windfall profits start hitting the balance sheet. The only bad news we can give is that, if you target specific company’s within the XLE holdings you can increase your yield to an average of 4.75%, diversify your holdings, and capture the same gains in share prices, maybe more. 

Exxon Mobil Among Oil Companies With Best Dividends 

At first glance, the top three holding in the XLE offers at least two choices but only one pans out, Exxon Mobil (NYSE: XOM). Exxon Mobil is the world’s 4th largest energy company after Aramco and two Chinese operations making it the largest energy company we want anything to do with. The stock yields over 4.3% and has a very positive outlook for dividend increases. The company is paying out about 63% of its earnings with oil prices approaching record highs. Production levels may fall (probably not, demand is still on the rise) but we see margins widening and dividend health improving. The company also has a good track record of increases having only ever raised the dividend. The increases were paused during the peak of the pandemic but have recently been reinstated if at a low 1.1% rate. Looking forward, we expect to see Exxon Mobil continue to pay and increase its dividend as well as buy back stock. 

It’s Not Too Late To Buy These Oil Stocks 

The Williams Companies Is The Highest Yeilding Oil Stock In The XLE 

Oddly enough, the stocks in XLE positions 2-7 are the lowest yielding in the group, numbers 8 and 9, however, put Exxon Mobil to shame. The Williams Companies (NYSE: WMB), an oil and gas infrastructure play centered in the U.S., is the highest yielding stock in the group and well-positioned within the industry. The company operates as an oil and gas handling and pipeline company with a yield of 5.2%. A look at the revenue and earnings history shows no impact from the pandemic and only sustained growth to record highs. In our view, growth should continue for the foreseeable future and we expect margin expansion as well. Turning to the dividend history, that is a bit choppy but shows sustained distribution increases in tandem with oil price increases so there is a tailwind. 

It’s Not Too Late To Buy These Oil Stocks 

Valero Energy, Refining A 4.7% Yield

Valero Energy (NYSE: VLO) is a refining stock with a 4.75% yield and a history of sustained dividend increases. The company’s revenue and earnings took a hit during the pandemic due to the massive decrease in demand for fuels but that situation has changed. Lately, revenue and earnings are outpacing the Marketbeat.com consensus estimates and we don’t think that trend will end.  

It’s Not Too Late To Buy These Oil Stocks 

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