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It’s Friday. Time to give you a stock pick from our sister newsletter, The Spill, so you can think about it over the weekend and maybe make a move Monday morning. While The Juice helps you be better with money across the board, The Spill focuses on stocks financial pros are researching and judges how good of buys they are. If you’re already sold, you can sign up for The Spill – for free – here. |
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Proprietary Data Insights Financial Pros’ Top Integrated Oil Stock Searches in the Last Month
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This Stock Climbed While Markets Fell |
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Amongst the major market selloffs, one name-held firm – Exxon Mobil (XOM). The company recently reported stellar earnings off the back of climbing oil prices and record outputs. From our TrackStar data, we noticed the name catching the attention of financial pros. Exxon’s stock trades at just 13x earnings and less than 18x free cash flow. But that’s not the only reason we like this stock. Exxon Mobil’s Business Exxon Mobil was the largest company by market capitalization from 2005 to 2011. Then, fracking happened, and the price of oil plunged along with Exxon’s share price. More than a decade later, the landscape has changed with large players growing, scooping up the tiny guys through acquisitions. Operating in over 50 countries, ExxonMobil extracts, refines, and markets petroleum products worldwide. Its vast portfolio includes everything from crude oil and natural gas to petrochemicals and lubricants Exxon is known as an integrated oil and gas company because it operates in all three parts of the energy supply chain: exploration and production, transportation, and refining and marketing. The company segments its business into the following areas:
In Q2 2024, ExxonMobil posted earnings of $9.2 billion, its second-highest second quarter in a decade. The company achieved record production in its Permian Basin and Guyana operations, with Permian output surging to 1.2 million barrels per day after integrating recently acquired Pioneer Natural Resources.
Source: Exxon Mobil Q2 2024 Earnings Presentation Financials
Source: Stock Analysis Exxon’s revenues rise and fall with the price of oil and energy demand. However, current revenues are significantly higher than they were before the pandemic while operating margins have significantly improved. What’s really got us excited is the nearly 10% free cash flow margin, generating $29 billion annually. That number is expected to grow proportionally or better with production. Exxon spends roughly $22.5 billion annually on CAPEX, returning almost $17.5 billion to shareholders through share buybacks and $15.6 billion through dividends, a combined yield of 6.4%. Yet, for all the money it makes, Exxon only carries $43.2 billion in debt, which is down more than $4.5 billion from last year. Valuation
Source: Seeking Alpha When you compare Exxon to its peers, it looks expensive. However, British Petroleum (BP), Petrobras (PBR), and YPF Sociedad Anónima (YPF) are all foreign companies, which investors will typically discount. If you just put Exxon up against Chevron (CVX), the two are fairly comparable. And that’s not much of a surprise considering Exxon’s latest addition of Pioneer Natural Resources. Growth
Source: Seeking Alpha As we mentioned earlier, revenue growth ebbs and flows with oil prices and energy demand. However, production also plays a big role. With Exxon adding Pioneer to its portfolio, future growth (or declines) are expected to exceed its peers. This would be a change from Exxon lagging Chevron’s sales growth over the last three to five years. Profitability
Source: Seeking Alpha One spot that’s always a point of pride for the company is its profitability. Exxon boasts consistently high margins, from EBIT on down to free cash flow. Yes, companies like Petrobras are cheap and pay massive dividends. But there is also a risk that the government could nationalize them overnight.
Our Opinion 10/10 Exxon Mobil is flat out a great company to invest in. It’s well-run, generous with its shareholders, and has a long history of success. Plus, it’s taking action on climate change, at least as well as any oil and gas company could be expected to. In the energy industry, size matters. And there is no one bigger than Exxon. |
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