Is Exxon Stock A Sell Despite Q2 Earnings Beat?

2 months ago 16
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Exxon Mobil's (XOM) reported better-than-expected 2nd 4th net connected July 30. But arsenic the Delta Covid-19 variant sweeps the U.S. request for lipid is falling. So is Exxon banal a sell? Take a look astatine Exxon net and the XOM banal chart.

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As Covid-19 worries measurement connected lipid prices, clime alteration has been beforehand and halfway for Big Oil pursuing Exxon's shareholder gathering connected May 26. Activist capitalist Engine No. 1 gained crushed successful its combat to get the U.S. lipid large to instrumentality a much proactive attack to climate change, which it believes volition person large ramifications for Exxon stock.

The hedge money wants Exxon to pledge to trim its emissions to net-zero by 2050 and replaced 3 committee members with its candidates. Greg Goff, ex-CEO of refiner Andeavor, biology idiosyncratic Kaisa Hietala, and Alexander Karsner, a strategist astatine Google's Alphabet (GOOGL), volition articulation the 12-person board.

Darren Woods was re-elected CEO, though helium apt volition look much unit to enactment connected a climate-change agenda. The committee shake-up is expected to person large ramifications for Exxon banal successful the future.

The wins travel arsenic 1 of the company's apical lobbyists was caught connected camera saying that Exxon helped money groups to halt the authorities from enacting clime alteration initiatives.

CEO Darren Woods pushed backmost saying that the lobbyist's comments were "entirely inconsistent with our committedness to the environment."

Exxon Stock Fundamental Analysis

Exxon reported Q2 EPS of $1.10, beating views by 9 cents arsenic gross much than doubled to $67.74 billion, supra forecasts for $64.64 billion. Oil-equivalent accumulation fell 2% to 3.6 cardinal barrels per day. Production successful the Permian Basin jumped 34% to 400,000 oil-equivalent bpd.

Upstream operations had an income of $3.2 cardinal vs. a nonaccomplishment of $1.65 cardinal a twelvemonth ago. But downstream operations swung to a nonaccomplishment of $227 cardinal from an income of $976 million. Income from chemicals changeable up to $2.3 cardinal from $467 million.

Exxon has remained committed to its dividend adjacent amid pressures during the Covid-19 pandemic, slashing spending and jobs to support the payout.

ExxonMobil satellite   headquarters(Katherine Welles/Shutterstock)

In December, Exxon slashed its five-year spending plan. The institution present plans to walk $20 billion-$25 cardinal a twelvemonth betwixt 2022 and 2025. That's down from a anterior forecast for an yearly concern of $30 cardinal during the aforesaid period.

Exxon net person stagnated astatine 0% implicit the past 3 years, according to IBD's Stock Checkup. On the gross side, Exxon's three-year maturation complaint has fallen 14%. Investors mostly should look for stocks with sustained net and income maturation of astatine slightest 25%.


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Exxon Stock Technical Analysis

Exxon net — and XOM banal — thin to emergence and autumn with crude lipid prices, which tin beryllium highly volatile.

U.S. lipid prices person climbed past the cardinal $70 per tube benchmark for the archetypal clip since October 2018, joining the planetary benchmark Brent. But manufacture watchers are besides acrophobic astir slowing economical maturation arsenic the highly infectious Delta Covid-19 variant spreads.

A level basal with a 64.12 bargain constituent failed, according to MarketSmith illustration analysis, aft a anterior breakout from a anterior 62.65 bargain constituent besides failed.

XOM banal is presently down much than 8% from its past bargain constituent and is trading beneath the 10-week line. Both are merchantability signals.

The relative spot line, which tracks a banal vs. the S&P 500 index, has been drifting little since June.

The Accumulation/Distribution standing of D- indicates much selling than buying of XOM banal by organization investors.

The caller banal enactment marks different motion successful its betterment since past year, erstwhile lipid collapsed and Exxon banal was replaced by Salesforce (CRM) connected the Dow Jones Industrial Average successful August, aft implicit 90 years.

Meanwhile, OPEC+ began expanding its accumulation quotas successful January arsenic request roseate with the coronavirus vaccine rollout. The group past continued loosening its output curbs successful May adjacent arsenic Covid-19 rates soared successful India, a large vigor market.

But OPEC+ deed an impasse successful July, failing to scope an statement to boost their accumulation quotas. The afloat ministerial gathering was delayed earlier being abandoned arsenic the radical failed to springiness successful to the UAE's demands to recalculate its quota. The radical yet reached an statement aft OPEC+ agreed to gradually extremity the remainder of accumulation curbs that began past year.

Exxon banal has a anemic IBD Composite Rating of 66 retired of 99 and a 61 EPS Rating.

As with different oil stocks to bargain and watch, Exxon banal volition emergence and autumn with crude lipid prices. So adjacent erstwhile Exxon looks bully based connected fundamentals and technicals, crude lipid prices whitethorn abruptly plunge, taking XOM banal down too.

Investors could take to bargain an vigor exchange-traded money arsenic a mode to play assemblage moves portion avoiding stock-specific risk. Energy Select Sector SPDR Fund (XLE) and iShares U.S. Energy ETF (IYE) are 2 energy-related ETFs. But those ETFs are inactive exposed to crude lipid terms swings.


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Exxon Mobil Shale Investments

As request shrinks, autarkic U.S. shale companies are scaling backmost spending to enactment wrong their equilibrium sheets, leaving the doorway unfastened for lipid majors.

Exxon became a bigger shale subordinate with a $5.6 cardinal woody successful 2017 to treble its lipid and state holdings successful the Permian Basin.

Exxon is successful the midst of plus income that could scope $25 cardinal done 2025, crossed Europe, Africa and Asia arsenic it looks to escaped up much superior to put successful the Permian Basin and monolithic projects similar an lipid tract successful Guyana.

Rivals are moving successful to grow shale holdings. In July 2020, Chevron announced it was buying lipid and state shaper Noble Energy successful an all-stock woody valued astatine $5 billion. Noble has 92,000 acres successful the Delaware Basin of the oil-rich Permian.

And successful October 2020, ConocoPhillips (COP) agreed to bargain Concho Resources successful an all-stock woody valued astatine $9.7 billion, creating the biggest autarkic U.S. lipid producer.

But a imaginable blockbuster merger could beryllium possible. Exxon and Chevron executives were successful preliminary talks for a merger successful the aboriginal days of the Covid-19 pandemic, sources told the Wall Street Journal. The talks aren't presently ongoing, but the sources told the Journal the discussions could beryllium revisited successful the future.

Shale stocks are besides merging. Pioneer Natural Resources (PXD) reached a woody successful October to bargain Parsley Energy for $4.5 cardinal successful stock.

Meanwhile, rival lipid majors similar BP (BP) and Royal Dutch Shell (RDSA) are making ample cuts and shifting distant from fossil fuels.

Shell is adjacent reportedly considering selling its Permian Basin assets arsenic the manufacture faces unit to code clime change.


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Is Exxon Stock A Buy?

Another XOM banal bargain constituent has failed. Oil prices person stalled precocious implicit worries of slowing economical maturation adjacent arsenic OPEC+ has failed to scope a woody to boost accumulation quotas.

Bottom line: Exxon banal is not a bargain and has entered merchantability range.

Investors tin cheque out IBD Stock Lists and other IBD content to find dozens of the best stocks to bargain oregon watch.

Follow Gillian Rich connected Twitter for vigor quality and more. 

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