Multinational oil and gas corporation Exxon Mobil Corporation (XOM) saw its shares rise 42.5% year-to-date as the company posted modest earnings and revenue growth in the first quarter of 2022, propelled by the rise in oil and gas prices after the Russian invasion of Ukraine. The oil giant reported downstream earnings of $332 million compared with a loss of $390 million in the first quarter of 2020. This was primarily attributable to improved industry fuel refining margins and lower expenses. XOM’s shares rallied 15.8% over the past three months and 5.3% over the past month.
Closing its last trading session at $85.25, XOM is trading just 6.8% below its 52-week high of $91.51. Moreover, the company tripled the size of its share repurchase program to send more cash back to shareholders. Although its exit from the Russia Sakhalin-1 operation resulted in an after-tax charge of $3.4 billion, the oil producer’s plans to expand carbon capture capacity at its facility in Wyoming and significant advancements at the Liza Phase 2 development in Guyana have attracted investor’s attention.
Here’s what could shape XOM’s performance in the coming months:
Solid Growth Estimates
Analysts expect XOM’s EPS to increase 120% year-over-year to $2.42 in the next quarter ending June 2022. Its consensus EPS estimate of $9.07 indicates a 68.6% increase in the current year ending September 2021. Moreover, its EPS is estimated to increase 15.9% over the next five years. XOM has an impressive earnings surprise history, as it surpassed Street EPS estimates in each of the trailing four quarters.
The consensus revenue estimate of $96.82 billion for the next quarter indicates a 42.9% improvement year-over-year. Also, its revenue is estimated to increase 34.8% year-over-year to $385.09 billion in fiscal 2022.
New Discoveries Could Boost Growth
Recently, the leading oil producer announced three new discoveries offshore Guyana and increased the estimated recoverable resource base for the Stabroek block to nearly 11 billion oil-equivalent barrels. Furthermore, XOM achieved its first oil at the Liza Phase 2 development in the first quarter. Also, its Payara FPSO construction is expected to start up before the 2023 end as it is approximately five months ahead of schedule. These new discoveries could boost the oil producer’s exploration activities and help achieve growth at an accelerated pace.
Certification for Natural Gas Production
On April 26, XOM announced that nearly 200 million cubic feet per day of natural gas produced from its Permian Basin facilities at Poker Lake, New Mexico, have been independently certified for methane emissions management. This certification will allow the company to meet increasing customer demand for energy produced with reduced emissions. Also, XOM is the first company to receive certification from MiQ for natural gas production associated with oil.
Impressive Financial Performance
XOM’s total revenue and other income grew 53% year-over-year to $90.5 billion in the first quarter ended March 31, 2022. Its net income grew 100.7% from the prior-year period to $5.48 billion, while net cash provided by operating activities rose 59.6% year-over-year to $14.79 billion. The company’s cash and cash equivalents came in at $11.07 billion compared to $3.52 billion in the first quarter of 2021. Also, its worldwide upstream earnings amounted to $4.49 billion, up 75.7% from the same period last year.
The oil producer’s trailing-12-month net income margin of 8.3% is 25% higher than the industry average of 6.6%. Moreover, the company’s trailing-12-month ROA and ROE of 6.8% and 14.2% compare favorably with the respective industry averages. Also, its trailing-12-month levered free cash flow of 10.2% is 40.7% higher than the industry average of 7.3%.
POWR Ratings Reflect Promising Outlook
XOM has an overall rating of B, which translates to Buy in our POWR Ratings system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. XOM has a Growth grade of B, consistent with analysts’ expectation that its revenue and earnings will grow.
Also, in terms of Momentum grade, XOM has an A. The stock’s price return over the past three months is in sync with this grade.
Additionally, it has a B grade for Quality. This justifies the company’s higher-than-industry net income margin.
Click here to see the additional POWR Ratings for XOM (Stability, Sentiment, and Value).
The stock is ranked #40 of 97 stocks in the B-rated Energy – Oil & Gas industry.
Bottom Line
Amid rising crude oil prices, the leading U.S. oil producer’s strong margin improvement and solid balance sheet should help the company maintain its dominant position in the oil industry. In addition, investor optimism surrounding the company’s progress in lower-emission opportunities and its ambitious exploration activities could allow it to create value for its shareholders. So, it could be wise to bet on the stock now.
How Does Exxon Mobil Corporation (XOM) Stack Up Against its Peers?
XOM has an overall B rating in our proprietary rating system. Check out these other stocks within the Energy – Oil & Gas industry with an A (Strong Buy) rating: Unit Corp. (UNTC) and Adams Resources & Energy, Inc. (AE).
XOM shares were trading at $86.00 per share on Monday morning, up $0.75 (+0.88%). Year-to-date, XOM has gained 42.10%, versus a -13.47% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.
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