ExxonMobil’s (NYSE: XOM) stock price has been on a tear since hitting the pandemic bottom, and it looks like that trend is not over. The stock is up more than 200% and could easily take it to 300% given the results, the outlook for oil prices, analyst sentiment and a recent uptick in institutional buying. The takeaway for investors is that supply, demand and price dynamics have this company’s cash flowing regardless of the decline in YOY revenue.
That is due to the decline in oil prices but is offset by an increase in production and efficiency that resulted in record quarterly earrings. This means that capital returns will continue, dividends and share repurchases might be increased, and debt will decline while the company invests in its future.
ExxonMobil Rising To All-Time Highs On Record Profits
ExxonMobil issued a mixed Q1 report, but the bad news is negligible and overshadowed by other details. The company’s revenue fell -4.4% to $86.56 billion compared to last year, and it missed the consensus estimate by 380 basis points, but some 1-offs impacted results. These include lower price realization and fewer working days in the quarter. The company says it increased production by 300,000 barrels per day to help meet global demand; it also got a new refinery upgrade running at full capacity, which will help drive sales at all levels of the business.
The earnings news is why the stock is moving higher. The company reported a wider-than-expected margin due to higher production rates and more efficient operations, resulting in record quarterly profits. Cash flow came in at $16.3 billion and FCF at $11.4 billion, which is more than sufficient to pay the dividend, continue buying shares at the current pace and leave more than $3.25 available for uses such as debt reduction and capital return increases. The company repurchased $4.3 billion in shares in Q1, equal to roughly 1% of the market cap, with shares trading at the current all-time high.
The company didn’t give guidance but says it is on track to reach its goal of $9 billion in structural cost savings. This and the stabilization of oil prices suggests record-level profitability will continue in Q2 and possibly Q3.
The Sell-Side Is Driving This Market Higher
Marketbeat.com’s analyst tracking tools haven’t picked up new commentary yet, but the trend in sentiment ahead of the report was bullish, and the report shouldn’t alter it. The analysts rate ExxonMobil a Moderate Buy with a price target of $124. That’s about 5% above the current levels and in the all-time high territory; it is also trending higher and may trend higher again now that the results are in.
Institutions are also buying ExxonMobil. The institutions have been buying on balance since Q1 2021, and their activity peaked in Q1 2023. The group purchased $26 billion in shares compared to less than $6 billion in sales and has ownership up to 57.5%, a solid figure for such a widely-held issue.
The Technical Outlook: Breakout Imminent For ExxonMobil
ExxonMobil shares are in an uptrend and are now reaching a new high. If the market can hold this high, it could lead to 20% or more upside. The risk is that gains could be capped at the all-time high, in which case a trading range would likely develop. Assuming the 2nd quarter results follow suit, the stock could move to a new high later in the year.
