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Why You Should Buy ExxonMobil (XOM) Despite Weak Q3 Earnings
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In the energy space, Exxon Mobil Corporation (XOM - Free Report) is a giant, having operations across upstream to downstream activities. However, late last month, the company reported weak third-quarter 2023 earnings, resulting from the oil equivalent production decline and lower realizations of crude and natural gas prices.
Despite this underperformance, the leading integrated energy stock continues to carry a Zacks Rank #2 (Buy), thanks to a slew of positive developments. In fact, investors should buy the dip, considering that the energy major has lost 6.2% year to date, in contrast to the S&P 500 Index’s growth of 19.2%.
Factors Favoring the Stock
Strong Upstream Presence
In the Permian Basin – the most prolific oil and gas resource in the United States – and offshore Guyana, ExxonMobil has a solid pipeline of profitable projects.
Last month, ExxonMobil entered into a staggering $59.5 billion all-stock deal to buy Pioneer Natural Resources . With Pioneer Natural being one of the foremost oil producers operating in the Permian, the move will bolster ExxonMobil's presence in the most prolific basin, more than doubling its footprint.
Also, in Stabroek Block, located off the coast of Guyana, ExxonMobil has made many major discoveries that significantly improve its production outlook. The advantaged growth projects of Guyana have lower greenhouse gas intensity than most of the oil and gas-producing resources across the globe.
Robust Balance Sheet
ExxonMobil has a strong balance sheet so that it can withstand adverse and uncertain business environments. XOM has a total debt-to-capitalization of 16.6% compared with 24% of composite stocks belonging to the industry.
In recent years, the energy giant has consistently maintained a lower debt-to-capitalization ratio compared to the industry's composite stocks. This reflects the company's ongoing commitment to sustaining a healthy balance sheet.
Truly Integrated Business Model
Apart from upstream operations, XOM has a strong presence in chemical and refining operations. The integration of its operations is leading to the company’s higher return on capital among the industry’s composite stocks.
Should commodity prices decline, ExxonMobil's exploration and production operations would be adversely impacted, with the refining and chemicals businesses stepping in to provide support. Another energy company with a strong integrated business model is Chevron Corporation (CVX - Free Report) . Benefiting from a robust management team, prudent capital allocation practices and a portfolio of low-cost, diversified assets, Chevron is well-positioned for success. Currently, CVX carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
XOM’s Aim to Become a Leading Lithium Producer
XOM recently announced its aim of becoming a leading lithium producer in North America. Since lithium is a key resource for manufacturing electric vehicle batteries, the company has huge potential in this space in the long run. The company expects its first production by 2027.
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Why You Should Buy ExxonMobil (XOM) Despite Weak Q3 Earnings
In the energy space, Exxon Mobil Corporation (XOM - Free Report) is a giant, having operations across upstream to downstream activities. However, late last month, the company reported weak third-quarter 2023 earnings, resulting from the oil equivalent production decline and lower realizations of crude and natural gas prices.
Despite this underperformance, the leading integrated energy stock continues to carry a Zacks Rank #2 (Buy), thanks to a slew of positive developments. In fact, investors should buy the dip, considering that the energy major has lost 6.2% year to date, in contrast to the S&P 500 Index’s growth of 19.2%.
Factors Favoring the Stock
Strong Upstream Presence
In the Permian Basin – the most prolific oil and gas resource in the United States – and offshore Guyana, ExxonMobil has a solid pipeline of profitable projects.
Last month, ExxonMobil entered into a staggering $59.5 billion all-stock deal to buy Pioneer Natural Resources . With Pioneer Natural being one of the foremost oil producers operating in the Permian, the move will bolster ExxonMobil's presence in the most prolific basin, more than doubling its footprint.
Also, in Stabroek Block, located off the coast of Guyana, ExxonMobil has made many major discoveries that significantly improve its production outlook. The advantaged growth projects of Guyana have lower greenhouse gas intensity than most of the oil and gas-producing resources across the globe.
Robust Balance Sheet
ExxonMobil has a strong balance sheet so that it can withstand adverse and uncertain business environments. XOM has a total debt-to-capitalization of 16.6% compared with 24% of composite stocks belonging to the industry.
In recent years, the energy giant has consistently maintained a lower debt-to-capitalization ratio compared to the industry's composite stocks. This reflects the company's ongoing commitment to sustaining a healthy balance sheet.
Truly Integrated Business Model
Apart from upstream operations, XOM has a strong presence in chemical and refining operations. The integration of its operations is leading to the company’s higher return on capital among the industry’s composite stocks.
Should commodity prices decline, ExxonMobil's exploration and production operations would be adversely impacted, with the refining and chemicals businesses stepping in to provide support. Another energy company with a strong integrated business model is Chevron Corporation (CVX - Free Report) . Benefiting from a robust management team, prudent capital allocation practices and a portfolio of low-cost, diversified assets, Chevron is well-positioned for success. Currently, CVX carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
XOM’s Aim to Become a Leading Lithium Producer
XOM recently announced its aim of becoming a leading lithium producer in North America. Since lithium is a key resource for manufacturing electric vehicle batteries, the company has huge potential in this space in the long run. The company expects its first production by 2027.