Exxon Mobil: Positioned for Strong Q1 Earnings and Potential Growth

Exxon Mobil (NYSE:XOM) is gearing up to unveil its first-quarter earnings on April 26, 2024, amidst expectations of robust performance driven by the surge in petroleum prices. Here’s why the company appears poised for a strong showing and why it could be an attractive investment opportunity:

Earnings Boost from Petroleum Prices:

• The increase in the average price for petroleum in Q1’24 is expected to significantly enhance Exxon Mobil’s earnings and free cash flow. With WTI crude oil prices rising by 21% during the quarter, Exxon Mobil is likely to benefit substantially.

Positive EPS Revision Momentum:

• Analysts have been revising their EPS estimates upward for Exxon Mobil, indicating growing optimism about the company’s performance. This positive revision momentum suggests the potential for Exxon Mobil to exceed consensus expectations.

Strategic Acquisitions and Expansion:

• Exxon Mobil’s acquisition of Pioneer Resources in a $60B all-stock transaction has bolstered its presence in the promising Permian Basin, doubling its production capacity. Additionally, recent approvals for capacity expansion in Guyana’s offshore development assets bode well for future growth.

Potential for Higher Capital Returns:

• With strong free cash flow expected, Exxon Mobil is well-positioned to engage in aggressive stock buybacks, offering investors the prospect of capital returns. The company’s history of share repurchases underscores its commitment to returning value to shareholders.

Attractive Valuation:

• Despite a 20% year-to-date return, Exxon Mobil remains undervalued, trading at a price-to-earnings ratio of 12.4X. Considering the company’s growth prospects and the supportive environment for petroleum prices, its shares could have a fair value of up to $135, offering significant upside potential.

Risks and Considerations:

• Potential risks for Exxon Mobil include a downturn in petroleum prices, which could impact free cash flows and margins. Disappointing production growth in key areas like the Permian Basin and Guyana could also pose challenges for the company.

Final Assessment:

• Exxon Mobil presents a compelling investment opportunity ahead of its Q1 earnings release, driven by favorable market conditions and positive momentum. With its solid fundamentals, potential for capital returns, and attractive valuation, the company stands out as an appealing choice for investors seeking exposure to the energy sector.