How Should Investors Play ExxonMobil Shares Post Q3 Earnings?

On Friday, Exxon Mobil Corporation XOM reported third-quarter 2024 earnings that exceeded expectations, driven by cost-cutting initiatives, high-yield investments and strategic divestments, all of which contribute to a strong business outlook. Before analyzing the factors underpinning this positive outlook and considering strategic options for investors, let’s first review the third-quarter results.XOM’s Q3 Earnings SnapshotExxonMobil reported earnings per share of $1.92 (excluding identified items), which beat the Zacks Consensus Estimate of $1.91. The bottom line, however, declined from the year-ago level of $2.27.Total quarterly revenues of $90 billion missed the Zacks Consensus Estimate of $93.5 billion. The top line also decreased from the year-ago figure of $90.8 billion. For more details, read our blog: Exxon Mobil Q3 Earnings Top Estimates on Higher Liquids Production.Chevron Corporation CVX and BP plc BP are two other prominent integrated energy companies. Both Chevron and BP have reported their earnings.Will Permian & Guyana Shape ExxonMobil’s Future?With a strong focus on strengthening its presence in the Permian, ExxonMobil completed the acquisition of Pioneer Natural Resources Company on May 3. With 1.4 million net acres of the combined company in the Delaware and Midland basins, having an estimated 16 billion barrels of oil equivalent resource, ExxonMobil has greatly transformed its upstream portfolio.Based on 2023 volumes, the company expects that its production from the most prolific basin will more than double to 1.3 million barrels of oil equivalent per day (MMBoE/D). For 2027, the energy giant expects its Permian production volume to increase to 2 MMBoE/D.Similar to its operations in the Permian, ExxonMobil boasts a robust project pipeline in offshore Guyana resources. The company is well-positioned to generate significant returns from both the Permian and Guyana due to low production costs in these assets. With oil prices remaining favorable this year, ExxonMobil is poised to generate substantial cash flows from its upstream operations, which contribute the majority to its total earnings.XOM’s Low-Carbon and Innovation InitiativesXOM is investing significantly in low-carbon initiatives, including a hydrogen facility with zero carbon emissions and extensive carbon capture and storage (CCS) projects. These efforts reflect XOM’s dedication to diversifying its portfolio and advancing energy solutions for a sustainable future.With its integrated business model, ExxonMobil is well protected when oil price turns low. This is because, apart from exploration and production activities, the company has an extensive footprint in refining and chemical businesses.Also, during uncertain times, ExxonMobil can rely on its robust balance sheet. Compared to the industry’s composite stocks, ExxonMobil maintains a much lower debt-to-capitalization ratio. Favorable commodity prices have enabled it to enhance its financial position and repay the debt incurred during the pandemic.How to Play ExxonMobil?In addition to its traditional upstream and downstream energy operations, ExxonMobil is entering the lithium market, a critical component in electric vehicle batteries. The world is requiring more lithium to meet the growth in electric vehicles, and XOM is thus well-positioned to gain in the long run.The positive developments have led the stock to gain 17.9% year to date, outpacing the 7% improvement of the composite stocks belonging to the industry. Image Source: Zacks Investment ResearchWith the price increase, the integrated energy giant is appearing relatively overvalued. The stock is trading at a 6.11x trailing 12-month Enterprise Value to Earnings Before Interest, Taxes, Depreciation and Amortization (EV/EBITDA), which is at a premium compared with the broader industry average of 3.88x. Image Source: Zacks Investment ResearchThis generally ensures that investors are willing to pay a premium—meaning they are paying more than what traditional valuation metrics suggest the stock is worth. This premium may indicate that investors are optimistic about ExxonMobil’s future growth and market position, which they believe justify the higher price.Before buying the stock, investors should weigh a few considerations. For instance, the acquisition of Pioneer and expansion into new ventures could raise short-term expenses due to integration costs, potentially affecting near-term profitability. The scale and complexity of these transactions also add to XOM’s operational demands.Additionally, although XOM’s investments in low-carbon technologies, hydrogen production and advanced materials are promising, the financial returns on these long-term projects remain uncertain. Scaling them profitably in the short term could prove challenging.However, the company’s overall outlook remains positive. XOM has witnessed its short-term Wall Street average price target to be 13.6% higher than the last closing price of $114.95, with the highest target set at $149, representing a potential upside of 29.6%. Image Source: Zacks Investment ResearchAs a result, existing investors should hold onto their shares to benefit from this upward price trend. However, for those considering a new investment in ExxonMobil, this might not be the best time. The stock, carrying a Zacks Rank #3 (Hold), is currently overvalued, so it’s wiser to wait for a more favorable entry point before investing. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report BP p.l.c. (BP): Free Stock Analysis Report Chevron Corporation (CVX): Free Stock Analysis Report Exxon Mobil Corporation (XOM): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks