Exxon Mobil Could Gush To New Highs Very Soon

Key Points

• Exxon Mobil beat on the top and bottom lines. 
• The company did not increase the dividend, but it did increase repurchases. 
• Exxon also improved its balance sheet by reducing debt and has the highest cash balance in years.

The market for Exxon Mobil Corporation NYSE: XOM was mixed in the wake of the Q4 results because the company did not raise its dividend like Chevron NYSE: CVX did. There was a possibility the company could do so, although it was slim, considering it had just increased the payout the previous quarter. What the company did, however, may be more beneficial to shareholders and certainly improves its ability to progress to net zero, reinvest in itself and continue to increase its capital returns for years to come. 

What Exxon Mobil did was improve its balance sheet. The company’s cash balance improved by $22.9 billion to $29.7 billion versus last year, at the highest levels in years. This is on top of paying and increasing the dividend, repurchasing shares and paying down debt. There is not one thing not to like about that. 

Exxon Mobil Blows Past The Consensus, Wow 

Exxon Mobil blew past the analysts' consensus, and is truly saying something. The estimates for the energy sector have been on the rise for over a year and reached new peaks just before the onset of Q4 reporting. The strength is due to demand and pricing, which have had a favorable impact on the margin.

The company also increased its production by 30% in key fields, which has set it up to continue producing gusher results like Q4. So, Exxon’s Q4 revenue came in at $95.43 billion and $5.22 billion ahead of the Marketbeat.com consensus estimates. This is up 12.3% versus last year and the strength more than carried through to the bottom line. 

Margins improved considerably over the last year as higher prices worked through the system. Q4 earnings of $12.8 billion are up 43% versus last year although the growth is slowing.

However, the takeaway is that oil prices have steadied above pre-pandemic levels and will sustain high profits for Exxon and other energy companies in 2023. Even with the threat of recession, the demand outlook favors higher prices so there is upside risk in the outlook.

Regardless, the company will continue to generate record-level profits for the foreseeable future and improve the balance sheet, the outlook for next year’s dividend increase and share repurchases. 

Exxon Mobil Increases Share Repurchase Program 

Exxon Mobil didn’t increase its dividend but increased the share repurchase program. The extension is worth $35 billion over the next 2 years and could easily be increased later in 2023. This is worth about 7.5% of the market and will support the share price. The analysts, as iffy as their activity has been lately, are supporting the price as well.

The pre-release consensus target was in-line with the price action but trending higher in all 3 comparisons and backed up by a Moderate Buy rating that has also been firmed in the last year. 

Turning to the chart, the price action in Exxon Mobil slipped initially but quickly firmed. The given signal is a trend-following buy-on-the-dip signal that may soon result in a new all-time high. The only thing this market needs is the Go-Ahead to buy, an upgrade from the right office could easily be the trigger.