Exxon Mobil (XOM) has retreated after reaching a buy point and a new high. Can XOM stock reclaim the throne of the energy industry? Or has the stock peaked?
XExxon stock fell to a 52-week low in late January before starting to recover. Exxon reported mixed quarterly earnings on Feb. 2, and the stock has been on the rise until its recent reversal. Shares hit a record high on April 12, before retracing.
Energy companies make up less than 4% of the S&P 500 as of 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 grow its business in Guyana, with its newest project named Whiptail. The $12.7 billion project will include up to 10 drill centers with 48 production and injection wells.
This is Exxon's sixth endeavor in the oil-rich Guyana Stabroek block, and is expected to add approximately 250,000 barrels of oil by the end of 2027.
Exxon continues to pursue its case to block the sale of Hess (HES) to Chevron. The Exxon case could now be pushed out until the end of 2024, according to Reuters.
Hess owns a 30% stake in the Stabroek oil field, operated by ExxonMobil affiliate ExxonMobil Guyana Limited. The sale of Hess to Chevron is being delayed and now could possibly finalize in 2025, if it occurs.
Exxon CEO Darren Woods assured investors that the company is not looking to buy Hess, CNBC reported March 18, although it has a right of first refusal on Hess's Guyana oil field.
Exxon and China National Offshore Oil Corporation, or CNOOC Group, are claiming they have a right to provide a counteroffer to Hess for the Guyana offshore oil operation project.
Chevron has agreed to buy Hess in a $53 billion stock deal that includes the Guyana project. The potential counteroffer prompted Chevron to alert investors that it may not go through with the acquisition of Hess "within the time frame the company anticipates or at all."
Crude Oil Prices Influence XOM Stock
Rising crude oil futures prices have lifted energy stocks off January lows. Oil prices hit levels in early April not seen since October as Middle East tensions escalate. Some analysts and oil executives think prices will remain elevated or continue to climb.
"Stronger-than-anticipated 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 a Barron's article.
The average price of gasoline across the U.S. on Wednesday was $3.66 per gallon and nearly unchanged from $3.67 one year ago, according to AAA data. West Texas Intermediate (WTI) oil prices have fallen from this month's highs to below $83 a barrel.
Natural gas prices soared after the Russia-Ukraine war erupted, but have plunged and have yet to recover.
Exxon Stock Fundamental Analysis
The company reported a beat on its Q4 earnings estimates but a miss on sales. Fourth-quarter adjusted EPS fell 27% from the prior year to $2.48 per share, while sales dropped 12% to $84.3 billion.
The oil giant had been one of one of America's most profitable companies. However, its 27% quarterly earnings drop in the fourth quarter followed a 49% drop in Q3, and a 53% drop in Q2. That's after three quarters of slowing growth prior to that, for a total of six straight quarters of slowing or declining profits.
At the same time, the 12% quarterly sales drop in Q4 followed declines of 4%, 28% and 19% in the prior three quarters, which were preceded by two quarters of diminishing growth. Exxon's subsidiary, XTO Energy, finalized the sale of its East Texas oil and gas assets in the fourth quarter. The deal brought in $4.12 billion in cash in 2023.
Exxon also announced its new Mobil Lithium business in the fourth quarter. The company plans to be a leader in producing lithium for global battery and electric vehicle markets. Drilling is underway in Arkansas, with production of lithium targeted for 2027.
FactSet estimates show first-quarter profits dropping 22% on an 8% sales decline.
Analysts expect 2024 EPS to drop to $9.27 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 sank to a dismal 14, and partly reflects a loss in 2020, in addition to declining quarterly profits in 2023.
The stock holds an Accumulation/Distribution Rating of A-, indicating fairly heavy institutional buying over the last 13 weeks. The stock's dividend yield has dipped to 3.2% as the stock price has risen.
XOM Stock Technical Analysis
Exxon stock broke out of an early stage saucer base with a 120.70 buy point on April 5. Shares reached a record high on April 12, but reversed lower and have continued to drop. The stock is now seeking support at its 21-day exponential moving average.
The stock faces resistance around 120 going back to November 2022. Its weekly MarketSurge chart shows four failed breakouts from back-to-back bases.
Exxon's relative strength line had been on a steep uptrend before stalling in April. Shares have gained around 18% in 2024 and outpaced the S&P 500's 5.9% increase through Tuesday's close.
Exxon's Stock Follows Oil Prices
As with other oil stocks, Exxon will rise and fall with crude oil prices. So even when Exxon looks good based on fundamentals, crude oil prices may suddenly plunge, taking XOM stock down, too. On the other hand, a rise in oil prices may help lift the stock.
Investors could choose to buy an energy exchange traded fund as a way to play sector moves while avoiding stock-specific risk. Energy Select Sector SPDR Fund (XLE) and the iShares U.S. Energy ETF (IYE) are two energy-related ETFs. But those ETFs are still exposed to crude oil price swings.
Exxon and Chevron are major weights 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 once again as shares retreat from the buy point. XOM stock is not currently a buy but investors could put it on a watchlist and wait for the stock to improve.
In addition, the overall stock market is weak, with the major indexes below their 50-day moving averages. Lastly, Exxon earnings are around the corner, and stocks can be volatile around earnings reports.
Investors can check out IBD Stock Lists and other IBD content to find dozens of the best stocks while waiting for Exxon's bottom line to improve and for the stock to reach a buy point.
Follow Kimberley Koenig for more stock market news on X, the platform formerly known as Twitter, @IBD_KKoenig.
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