ExxonMobil (XOM) has pulled back after reaching a buy point and a new high. Can XOM Stock Reclaim the Throne of the Energy Industry? Or has the stock reached its peak?
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Exxon shares fell to a 52-week low in late January before starting to recover. Exxon reported mixed quarterly results on Feb. 2, and the stock has been on the rise until the recent turnaround. Shares hit an all-time high on April 12 before retreating.
Energy companies will represent less than 4% of the S&P 500 in March 2024. And Chevron (CVX) continues to battle Exxon Mobil for leadership of the energy industry, as do foreign oil giants such as Shell (SHEL) and BP (BP).
Exxon continues to expand its operations in Guyana with its latest project called Whiptail. The $12.7 billion project includes up to ten drilling centers with 48 production and injection wells.
This is Exxon’s sixth foray into the oil-rich Guyana Stabroek block and is expected to add about 250,000 barrels of oil by the end of 2027.
Exxon continues to pursue its case to block the sale of Hes (HES) to Chevron. According to Reuters, the Exxon case could now be postponed until the end of 2024.
Hess owns a 30% interest in the Stabroek oil field, operated by ExxonMobil affiliate ExxonMobil Guyana Limited. The sale of Hess to Chevron is being postponed and could now potentially close in 2025, if it occurs.
Exxon CEO Darren Woods assured investors that the company has no plans to buy Hess, CNBC reported March 18, even though it has a right of first refusal on the Hess oil field in Guyana.
Exxon and China National Offshore Oil Corporation, or CNOOC Group, claim they have the right to make a counter-offer to Hess for the offshore oil operations project in Guyana.
Chevron has agreed to buy Hess in an all-stock deal worth $53 billion that includes the Guyana project. The potential counteroffer prompted Chevron to warn investors that the Hess acquisition might not go through “within the timeframe the company expects, if at all.”
Crude oil prices impact XOM stock
Rising crude oil futures prices have lifted energy stocks from January lows. Oil prices reached levels not seen since October in early April as tensions escalate in the Middle East. Some analysts and oil executives think prices will remain high or continue to rise.
“Stronger-than-expected demand, OPEC cuts and renewed geopolitical uncertainty will keep prices significantly elevated, with some suggestions that triple digits are back on the table,” said RBC Capital Markets strategist Helima Croft in an article from Barron’s .
The average U.S. gasoline price was $3.66 per gallon on Wednesday, essentially unchanged from $3.67 a year ago, according to AAA data. West Texas Intermediate (WTI) oil prices have fallen from this month’s high to below $83 per barrel.
Natural gas prices soared after the outbreak of war between Russia and Ukraine, but have fallen and have yet to recover.
Fundamental Analysis of Exxon Stock
The company reported a profit forecast for the fourth quarter, but a revenue loss. Fourth quarter adjusted earnings per share fell 27% from the prior year to $2.48 per share, while revenue fell 12% to $84.3 billion.
The oil giant was one of America’s most profitable companies. However, the 27% quarterly profit decline in the fourth quarter followed a 49% decline in the third quarter and a 53% decline in the second quarter. That’s after three quarters of slowing growth before that, for a total of six consecutive quarters of slowing or declining profits.
At the same time, the 12% quarter-on-quarter revenue decline in the fourth quarter followed declines of 4%, 28% and 19% in the previous three quarters, which were preceded by two quarters of slowing growth. Exxon’s subsidiary, XTO Energy, completed the sale of its oil and gas assets in East Texas in the fourth quarter. The deal raised $4.12 billion in cash by 2023.
Exxon also announced its new Mobil Lithium business in the fourth quarter. The company plans to be a leader in lithium production for the global battery and electric vehicle markets. Drilling is underway in Arkansas and lithium production is planned for 2027.
According to FactSet estimates, first-quarter profits are down 22%, while revenue is down 8%.
Analysts expect earnings per share to fall to $9.27 in 2024 from $9.52 in 2023, then rise to $9.72 in 2025, according to MarketSurge. Exxon will report its first-quarter results on April 26.
XOM Stock’s Composite Rating has improved to a mediocre 57. Its EPS Rating fell to a dismal 14, partially reflecting a loss in 2020, in addition to declining quarterly profits in 2023.
The stock has an accumulation/distribution rating of A-, indicating fairly heavy institutional buying over the last thirteen weeks. The stock’s dividend yield has fallen to 3.2% as the share price has risen.
Technical Analysis of XOM Stocks
Exxon shares broke out early with a 120.70 buy point on April 5. Shares hit an all-time high on April 12, but reversed lower and continued to fall. The stock is now seeking support at its 21-day exponential moving average.
The stock is facing resistance around 120 going back to November 2022. The weekly MarketSurge chart shows four failed breakouts of consecutive bases.
Exxon’s relative strength line trended steeply before stalling in April. Shares are up about 18% in 2024, surpassing the S&P 500’s 5.9% gain through Tuesday’s close.
Exxon shares follow oil prices
Like other oil stocks, Exxon will rise and fall with the price of crude oil. So even if Exxon looks good based on fundamentals, crude oil prices could suddenly plummet, sending XOM stock down as well. On the other hand, a rise in oil prices can help the stock price rise.
Investors might choose to buy an energy exchange-traded fund as a way to play sector moves while avoiding stock-specific risks. Energy Select Sector SPDR Fund (XLE) and the iShares US Energy ETF (IYE) are two energy-related ETFs. But these ETFs are still exposed to fluctuations in the price of crude oil.
Exxon and Chevron are major players in XLE.
Is Exxon’s XOM stock a buy?
The bottom line: XOM stock broke out of a base, but the breakout is in danger of failing again as shares pull back from the buy point. XOM stock isn’t a buy right now, but investors can put it on a watchlist and wait for the stock to improve.
Furthermore, the overall stock market is weak, with the major indices trading below their 50-day moving averages. Finally, Exxon’s earnings are looming, and shares could be volatile around earnings reports.
Investors can look at IBD stock lists and other IBD content to find dozens of the best stocks as they wait for Exxon’s earnings numbers to improve and for the stock to reach a buy point.
For more stock market news, follow Kimberley Koenig on X, the platform formerly known as Twitter, @IBD_KKoenig.
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