Since the beginning of the year, Exxon stock (NYSE:XOM) has been climbing, first in response to rising oil prices and then in response to Russia’s invasion on Ukraine. And as the war in Ukraine continues, Exxon stock has recovered and is creating a foundation following a five-week decline in oil stocks in June and early July.
Should you hold or purchase the stock today based on a projected rebound, predicted profitability, and a planned growth of its refinery business as Exxon is ready to release its Q3 earnings? View the Exxon stock chart to get the solution.
Oil prices have increased as the West moved away from Russian supplies and the markets were concerned about shipping delays as a result of rising inflation and Russia’s invasion.
However, after reaching a peak of nearly $130 on March 7, U.S. crude oil prices have decreased. On Thursday, oil prices were close to their lowest point since January, hovering at $87 per barrel.
That is true despite Vladimir Putin, the president of Russia, threatening to strike Ukraine with nuclear weapons and after Kyiv just reclaimed some Russian-occupied territory.
According to federal documents published earlier this month, Exxon predicted that its operational profit might total over $11 billion in the third quarter. That would be a big increase from the $6.7 billion recorded in Q2 of last year, but a severe decline from the record $17.6 billion operating profit from Q2.
Many oil equities have reached their limits, but in recent months, the sector has weeded out the underperformers and landed on firms that investors think will endure over the long term. The majority of energy equities have outperformed all other stocks in terms of third quarter expected earnings. One of those outstanding energy stocks is Exxon.
With a purchase target of 105.67, Exxon stock is establishing a consolidation on an ill-defined base. According to MarketSmith’s analysis of the chart, investors can alternatively wait to see whether another base forms, which would allow for an earlier entry of 101.66. Exxon previously finished a cup with handle successfully in April with a purchase point of 89.90.
Fundamental Analysis of the Exxon Stock
Exxon generated significant cash flow and invested it in shale reserves and its refinery operations. Moreover, it raised the amount of its yearly dividend to $15 billion, or $3.52 per share. Exxon is in a great position to return money to shareholders in the now and the future.
According to FactSet, Wall Street raised its forecasts for XOM’s third quarter to include $3.68 in profits per share and $107.2 billion in sales. Exxon is expected to release Q3 financial results around October 28.
With sales of $115.7 billion and earnings of $4.14 billion, the corporation is substantially above Wall Street expectations. Sales jumped 70%, while earnings surged 276% over the same period last year.
According to the corporation, the increase in Q2 was caused by a strong demand for refined goods, a limited supply of oil, and natural gas. According to Exxon Mobil, this has raised both natural gas realizations and refining margins to levels substantially beyond the previous 10-year range.
President Joe Biden put the burden for the rising cost of petrol on the oil industry this summer and provided $500 million for clean energy projects on U.S. mining grounds. Exxon was chastised by Biden for maintaining a low oil supply and high gasoline prices while not boosting capital expenditures. In an effort to reduce gas costs, Biden has also increased supply by opening up the United States’ strategic oil reserves.
According to AAA data, the national average price of petrol on Thursday was $3.91, down from above $5 a gallon before the summer season got underway.
The Prospects For Exxon
During a visit to Los Angeles, Biden told reporters, “We’re going to make sure that everyone knows Exxon’s profits.” “This year, Exxon made more money than God.”
Response from Exxon “Exxon Mobil has made the most investments of any firm to expand the oil and gas resources in the United States. This includes more than $50 billion in investments made in the US over the previous five years, which have led to an almost 50% rise in our country’s oil output during this time.”
No significant analysts have criticized Exxon shares thus far, however this month Piper Sandler lowered its target price to $108 and Morgan Stanley raised it to $113. On XOM, both businesses kept their buy rating.
According to Devin McDermott, an analyst at Morgan Stanley, the corporation might produce $50 billion in free cash flow this year after capital expenditures. In a message to investors in June, he said that was more than enough to fund yearly dividends as well as expected stock repurchases of $15 billion.
When “many in the sector curtailed investment,” McDermott said, Exxon continued to make investments in its refining business, including initiatives in the Netherlands and Texas.
According to him, XOM benefits much more than its integrated counterparts because it is the largest refiner and marketer of petroleum products in the world.
Given the robust cash creation, Goldman Sachs stated: “We anticipate a number of (oil) companies to declare further progress towards capital returns, and are keen on any new commentary on alleviating cost pressures.”
Additionally, Exxon disclosed that it found two more oil wells in July off the coast of Guyana, bringing the total number of oil well finds in and near the area to seven. According to a news release from Exxon, “The Guyana investment plan continues to generate great results.”
The oil firm also declared earlier this year that it will divide into three business entities. To reduce expenses, the new organization combines the chemical and refining businesses into a single reporting segment. By the middle of 2023, the business also intends to move its headquarters from Irving, Texas, to Houston.
Long-term oil consumption is declining as other energy sources gain traction. Independent U.S. shale oil businesses are reducing their spending in order to maintain a good financial sheet. That makes it possible for oil companies to capture market share.
Exxon has increased its interests in the Texas and New Mexico Permian Basin, making it a more significant role in the shale industry.
Stock technical analysis for Exxon
According to MarketSmith research, Exxon stock was able to surpass a cup-and-handle purchase mark of 89.90 on May 4. The stock has been consolidating since since, with a purchase point of 105.67.
The stock has risen over the previous several weeks, crossing both its 21-day exponential moving average and its 50-day moving average, despite the firm’s minimal trading activity. It is much above the 200-day line.
An hopeful indicator is that the relative strength line is still standing.
The Composite Rating for the XOM stock is 100. The underwhelming 80 EPS Rating for XOM is mostly due to a loss in 2020.
A positive perspective on Exxon Mobil shares is strengthened by improving earnings performance. Analysts had predicted that the cost of a barrel of oil would soar to as much as $200.
Should I buy Exxon stock?
The stock market movement last year was a setback for Exxon. After 90 years, Exxon shares lost its position in the Dow Jones Industrial Average due to the drop in oil prices from 2014 to 2020. In August 2021, Salesforce (CRM) took over for Exxon.
Exxon stock will increase and decrease along with the price of crude oil, much like other oil stocks to purchase and monitor. Thus, even if Exxon appears to be performing well in terms of fundamentals and technicals, crude oil prices may suddenly fall, which would cause the XOM stock to fall as well.
An energy exchange traded fund might be purchased by investors as a means to profit from sector movements without taking on stock-specific risk. Two energy-related ETFs are the iShares U.S. Energy ETF (IYE) and the Energy Select Sector SPDR Fund (XLE). But such ETFs are nonetheless vulnerable to fluctuations in crude oil prices.
Important weights in XLE include Exxon and Chevron.
In conclusion, Exxon stock is consolidating at 105.67, its purchase price. Although it isn’t a buy right now, it may be close to one shortly, particularly if it announces solid Q3 earnings. Exxon has generally fared better than a volatile market and may bounce back from current lows.
Featured Image: Megapixl © Jetcityimage
Author Valerie Remorosa