ExxonMobil: Production Offset Prices, Capital Return Safe in 2025

Key Points

• ExxonMobil reaffirmed its capital return outlook for 2025 after competitors cut theirs.
• There is a risk of a buyback reduction, but not until next fiscal year.
• The dividend is worth 3.75%, and buybacks reduced the count by 1% in Q1. 

ExxonMobil’s NYSE: XOM 2025 Q1 results prove the company’s resilience in uncertain markets. The last few years of positioning, cost-cutting, and leaning into technology-driven efficiency paid off with better-than-expected profitability and an outlook for sustainable capital return. The capital return is critical because it is industry-leading, reduces the share count quarterly, and competitors are cutting theirs. Chevron and BP announced cuts to their share repurchase plans that average more than 40%. That is a significant headwind for sentiment, and it is also undercutting market support. 

ExxonMobil Reaffirms Capital Return for 2025, but Risks Exist

On the other hand, ExxonMobil affirmed its outlook for $20 billion in capital return this year. That comes after $9.1 billion of return in Q1, including dividends and share repurchases. The dividend is significant enough on its own, yielding about 3.75% in early May, and there is an expectation for the distribution to grow annually. ExxonMobil is a Dividend Aristocrat with 26 consecutive annual increases, paying roughly 50% of its 2025 earnings forecast, growing its yield at a sustainable low-single-digit pace. 

Regarding the share repurchases, ExxonMobil spent more on buybacks than on dividends. The bad news is that the share count is up YOY, but there is a mitigating factor: the share impact of the accretive and growth-driving Pioneer acquisition. The good news is that shares are down by nearly 1% sequentially at the end of Q1 and are expected to continue falling as the year progresses. Other bad news is that there is a risk that the capital return will be reduced next year. The company’s capital return in Q1 exceeded the free cash flow (FCF), negatively impacting the balance sheet. 

ExxonMobil’s balance sheet is healthy despite the negative impact. Although cash, current, and total assets are down by a low single-digit amount, debt and liabilities are also down, leaving equity flat. The company can sustain this pace of cash burn for a few more quarters, but not much longer without something changing. 

Exxon’s Stock Price Outlook: Range-Bound With a Chance of Lower Prices

Exxon’s analysts' trends align with an outlook for range-bound trading with a firm Moderate Buy rating and bullish bias offset by price target reductions. The price target reductions in Q2 put this stock at or slightly below the mid-point of its trading range, but there is a risk.

The risk is that the analysts will continue to lower targets as Q2 progresses and into the end of the year, pressuring the consensus target lower and the market to set new lows, potentially. That risk increases if the outlook for capital return cuts increases. XOM stock could fall to $90 or lower in that scenario.

ExxonMobil Stock Price is Steady After Reporting Mixed Q1 Results 

ExxonMobil’s Q1 was mixed. Revenue was flat compared to the prior year and slightly below the analyst's consensus despite a significant decline in oil prices. The average price of WTI fell about 10% in Q1, impacting margin, cash flow, and profitability in three of four segments. The saving grace is a 20% increase in production to offset the difference. 

The upstream segment is the standout, growing earnings by more than 19% on increased production and the Pioneer acquisition, which is credited with most of the growth. Due to the comps to last year and the outlook for production growth, the upstream segment should continue performing well this year and next. 

ExxonMobil anticipates launching 10 new projects this year. Regarding earnings, Exxon’s $1.76 in adjusted revenue is down compared to the prior, impacted by crude prices, refinery margin, and growth investments, but $0.03 ahead of forecasts despite the top-line weakness.