Windfall Profits Have Exxon Mobil On Track For New Highs

Exxon Mobil Has Game-Changing Results 

The results from Exxon Mobil (NYSE: XOM) and competitors like Chevron (NYSE: CVX) and Shell (NYSE: SHEL) have proved the thesis of windfall profits in the energy sector correct. These companies not only grew their revenue and earnings but set company records and outpaced analysts' estimates that have only been rising over the last year. The takeaway is that Exxon and its brethren have had a game-changing quarter driven by high oil prices and the outlook for the same is robust. While oil prices have come down from their peak WTI is still trading above key support at the $96 level and appears to be in a trading range. What this means for investors is an opportunity for dividends, dividend growth, and share repurchases that will impact the price action for the next few quarters at least. 

“Second-quarter earnings of $17.9 billion compared with $5.5 billion in the first quarter of 2022. Excluding identified items, earnings of $17.6 billion increased $8.7 billion from the prior quarter, driven by a tight supply/demand balance for oil, natural gas, and refined products, which have increased both natural gas realizations and refining margins well above the 10-year range,” said Exxon Mobil in the Q2 press release. 

Exxon Hits A Gusher In Q2 2022

Exxon Mobil had a fantastic quarter in Q2 driven by demand, prices, and internal efforts to improve operations. The company reported $115.68 billion in net revenue for a gain of 70.8% over last year beating the analyst's consensus by 360 basis points. The salient point, however, is that pricing gains that drove revenue also drove substantial margin improvement across all product lines. The only negative within the report is that that two segments, Chemicals and Specialty, saw a YOY decline in earnings driven by economic headwinds relating to China’s COVID lockdowns and rising input costs. 

The two core segments Upstream and Energy Products, however, saw their earnings grow triple digits and more versus last year. The Upstream segment produced earnings growth of 465% while the Energy Products segments reversed the slight loss posted last year into $5.3 billion in profits. That’s about 30% of the net earnings and similar results are expected for the coming quarters. On the bottom line, the adjusted EPS of $4.14 is up 276% from last year outpacing the sector consensus by 1000 basis points and beating its Marketbeat.com consensus by a full $0.25. 

Exxon On Track To Increase The Capital Returns 

Exxon Mobil paid an attractive dividend before the Q2 results and the outlook for dividend payments only got brighter in its wake. The company reports FCF more than doubled versus last which more than suggests ample cash flow for distribution increases and share repurchases without the need for added debt. As it is, the company is paying out about half of the consensus estimate for earnings and yields about 3.75%. 

The Technical Outlook: Exxon Mobil On Track For New Highs

Shares of Exxon Mobil have been in rebound mode the last few weeks following a correction from the $100 level. The rebound is gaining momentum in the wake of the Q2 release and has the stock on track to retest the $100 level if not break above it. A move above $100 would put the market close to setting a new all-time high and that is a possibility. The current all-time high is $105.57, a move above that would be very bullish for the stock and might take the price action up into the $140 to $170 range