Despite the recent 10% fall in oil prices and a dip in Exxon Mobil (NYSE:XOM) shares, experts are advising against selling energy stocks, as West Texas Intermediate (WTI) has risen by 13% since the start of Q3, indicating promising results ahead.
The Organization of Petroleum Exporting Countries and its allies (OPEC+) have cut production, resulting in a global shortfall that has pushed up oil prices and boosted Exxon's Q3 earnings. Despite high oil and natural gas prices in 2022 affecting revenue and causing high throughput in downstream businesses, Exxon anticipates operating profits between $8.3 billion to $11.4 billion. This forecast surpasses analysts' consensus of $9.22 billion and the guidance mid-point of $9.85 billion stated in the pre-announcement for Q3.
The correction in oil prices has been driven by fears of inflation, high-interest rates, and potential demand destruction. Yet, data indicates that US crude and distillate stockpiles are declining more than expected.
Exxon's stock is a popular choice among retail investors, analysts, money managers, and institutions. These groups own 60% of the stock and have shown an uptick in buying during Q3. Analysts have rated the stock as a Moderate Buy with a price target 11% above recent action and up 28% year-over-year (YOY).
Exxon trades at 11 times its earnings outlook, offering value and a solid 3.26% yield with a high safety score. The company has maintained annual dividend increases for four decades, supported by share repurchases. According to InvestingPro Data, the P/E ratio is at 8.44, with a dividend yield of 3.34%. Notably, InvestingPro Tips highlight that Exxon has raised its dividend for 40 consecutive years and has consistently increased earnings per share.
Since 2019, Exxon's debt has been on the rise but is now falling sharply from peak COVID-19 levels as its cash balance significantly increases. This reduction is helping maintain a low debt-to-equity ratio of 20%, reducing net debt. InvestingPro Tips also point out that Exxon operates with a moderate level of debt, and its cash flows can sufficiently cover interest payments.
The recent Golden Cross in oil price and Exxon price suggests a bullish market for the next 15-20 months with support at or near the 150-day exponential moving average (EMA). If the stock falls to the $105 region, it would offer deeper value and a higher yield, providing a solid buy signal. This aligns with the InvestingPro Fair Value of $115.5, indicating a potential upside for investors.
For more insights like these, check out the InvestingPro Tips on Exxon and other companies at InvestingPro where there are 13 more tips listed for Exxon alone.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.