Exxon Mobil Corporation (XOM Quick QuoteXOM - Free Report) is a well-rounded oil and gas titan that has gone on an impressive run over the past year and a half after a protracted recession with the broader energy space. XOM posted impressive growth in 2021 and the focus on keeping costs down, along with rising oil prices, helped make Exxon worth considering in the midst of the crisis in Ukraine.
Comeback story
The initial Covid blow seems light years away, as oil prices and shares of companies like Exxon plunged between February and April 2020. Oil prices rebounded severely from their Covid lows in early March of 2021 to around $65 a barrel. As of Friday afternoon trading, oil is now sitting at around $115 a barrel.
Exxon and others benefited from rising oil and energy prices amid a surge in demand as the U.S. And economies around the world came back to life. Travel, including air travel, has already made a serious comeback and widespread energy demand is returning to pre-Covid levels.
Exxon reported a profit of $23 billion in 2021. That's its highest total since 2014 and included $8.9 billion in profit in the fourth quarter. The firm also generated $48 billion in cash flow from operating activities, the highest level since 2012, "more than covering capital investments, debt reduction and dividends."
Exxon's FY21 revenue rose 57% to $285.6 billion, meanwhile, XOM - from an adjusted loss of $0.33 per share to +$5.38 per share. "Our effective pandemic response, focused investments during down cycles, and structural cost savings positioned us to realize the full benefits of the market recovery last year," CEO Darren Woods said in prepared Q4 remarks.
"We have made great progress in 2021 and our plans ahead position us to lead in cash flow and earnings growth, operating performance and energy transition."
Current Geopolitical Concerns
There has been a lot in the world to say since Exxon reported its Q4 results and provided guidance on February 1, it's an understatement. The Russian invasion of Ukraine has hit global energy markets. The situation has sent oil prices up from around $92 a barrel as recently as February 25 to above $110 a barrel. Oil has not been at these levels since 2014.
Russia is a major supplier of oil and gas to Europe and elsewhere and it is unclear what is on the table in terms of energy-focused sanctions as the current situation has already raised prices dramatically. Exxon said it was halting operations of a billion-dollar oil and gas project in Russia and would stop investing in the country amid attacks on Ukraine. Shell and BP have taken similar actions.
Outlook
Exxon, like most of the industry, is slowing its capital spending and cutting costs amid rebounding demand, rather than blowing away expenditures to ramp up production.
XOM said at its Investor Day in early March that its projected savings and other improvements are set to enable Exxon to "double earnings and cash flow efficiencies" by 2027 compared to 2019, as well as "reduce breakeven costs." reduce by approximately $10 a barrel, boost return on capital employed, and permanently increase total shareholder returns and distributions."
Current Jax estimates call for Exxon's revenue to climb another 8% to $308 billion in 2019 and 2018 to easily top its pre-Covid totals. The company's adjusted earnings are forecast to increase 29% to $6.93 per share. Also, XOM's consensus EPS estimates for FY22 and FY23 have jumped 16% and 12%, respectively, since their Q4 release.
Some other basics
Exxon's earnings revision activity helps it achieve Jax Rank #1 (strong buy) right now. The stock also receives an "A" grade for growth and momentum in our Style Score system, and its industry sits in the top 10% of the more than 250 Zack industries.
Shares of Exxon have risen 65% over the past two years to outperform its highly-ranked industry top 39% and the S&P 500's 47%. This segment of success includes a 35% increase versus the benchmark index's nearly 10% decline for the start of 2022 and its oil industry's 25% gain.
XOM again hit a new 52-week high of $84 per share on Friday. Luckily there's more room to run before it returns to its 2018 levels and plenty of runway to go back to its 2014 peak of about $100 a share.
Despite its recent climb, Exxon is trading at a 50% discount to its year-long high of 12.1X forward 12-month earnings and is right in its middle. XOM's current levels also represent a solid discount where it traded for several years, leading to the pandemic.
Ground level
Exxon's 4.3% dividend yield provides investors with solid income along with exposure to the resurgent oil and energy markets. The stock's yield is above its industry average of 4% and crushes the 10-year U.S. Treasury's 1.7% and the 30-year 2.2%.
Exxon's stellar 2021 helped it pay off nearly $20 billion in debt, or the majority of the total debt it borrowed during the pandemic. And it announced a new $10 billion stock purchase program in February. On top of that, Exxon remains focused on expanding its low-carbon businesses, as part of its broader future-looking efforts.
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