Exxon Mobil’s (XOM) stock action tends to rise and fall with oil prices, which can be highly volatile. Is XOM stock a buy following fourth-quarter earnings and a reporting restructuring? For the answer, take a look at Exxon’s stock chart.
On Feb. 1, Exxon reported earnings per share of $2.05, beating analysts estimates for $1.95 per share. Revenue of $84.97 billion was up more than 82%, but just short of consensus views.
Capital spending rose to $5.8 billion, in line with guidance. Cash flow from operations hit $48 million, the highest level since 20212, according to the company.
The oil major also announced it would reorganize into three business units on April 1. Under the new structure, the chemicals and refining divisions will be combined into a single reporting segment, in order to cut costs. The change will take place on April 1. And the company plans to relocate its headquarters from Irving, Texas, to Houston by mid-2023.
Exxon Stock Fundamental Analysis
Exxon remained committed to its dividend despite the financial pressure imposed by the Covid-19 pandemic, slashing spending and jobs to protect the payout.
The oil giant plans to return up to $10 billion in capital to shareholders through buybacks of XOM stock.
Like most oil producers, Exxon earnings crashed into losses during the pandemic.
Exxon’s annual sales have dropped steadily since 2018, and have been in a downward trend for the past decade. Investors generally should look for stocks with sustained quarterly earnings and sales growth of at least 25%.
Exxon Stock Technical Analysis
XOM stock broke out of a cup base with a 66.48 entry point on Jan. 5, according to MarketSmith chart analysis, but has since extended out of buy range and is in profit-taking range.
The Accumulation/Distribution Rating of A indicates institutional investors are adding to their positions in XOM stock.
The recent stock action marks another step in its recovery since last year when oil collapsed. That led to Exxon stock losing its status as a Dow Jones Industrial Average listing after 90 years, replaced by Salesforce (CRM) in August. Exxon stock has a best-possible IBD Composite Rating of 99.
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 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.
Exxon Mobil Shale Investments
As demand shrinks, independent U.S. shale companies are scaling back their spending to stay keep their balance sheets on positive footing. That leaves the door open for oil majors to take market share.
Exxon became a bigger shale player in 2017, paying $5.6 billion to double its oil and gas holdings in the Permian Basin.
Exxon is in the midst of asset sales across Europe, Africa and Asia that could reach $25 billion through 2025. The sales aim to free up more capital to invest in the Permian Basin, as well as massive projects like an oil field in Guyana.
Rivals are also moving in to expand shale holdings. In July 2020, Chevron announced it was buying oil and gas 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.
But an even larger blockbuster merger could be possible. Exxon and Chevron executives were in preliminary talks for a merger in the early days of the Covid-19 pandemic, sources told The Wall Street Journal. The talks aren’t currently ongoing, but the sources told the Journal the discussions could be revisited in the future.
Domestic shale stocks are also merging. Pioneer Natural Resources (PXD) reached an all-stock deal in 2020 to buy Parsley Energy for $4.5 billion.
Big Oil Grapples With Climate Change
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.
Climate change has been front and center for Big Oil following Exxon’s shareholder meeting on May 26. Activist investor Engine No. 1 gained ground in its fight to get the U.S. oil major to take a more proactive approach to climate change, which it believes will have major ramifications for Exxon stock.
The hedge fund wanted Exxon to pledge to reduce its emissions to net-zero by 2050. The group replaced three board members with its candidates. Greg Goff, ex-CEO of refiner Andeavor, environmental scientist Kaisa Hietala, and Alexander Karsner, a strategist at Google’s Alphabet (GOOGL), will join the 12-person board.
Last year, Chevron 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?
XOM stock is taking a hard look at climate change and greenhouse gas emissions following pressure from investors. But analysts are bullish on oil prices in 2022.
Bottom line: Exxon stock is currently not a buy and is in profit-taking range.
Follow Gillian Rich on Twitter for energy news and more.
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