Exxon Tops Q4 Earnings Expectations Thanks to High Oil, Natural Gas Prices

Exxon Mobil Stock at a Glance

• Current Morningstar Fair Value Estimate: $102
• Exxon Mobil Stock Star Rating: 3 Stars
• Economic Moat Rating: Narrow
• Moat Trend Rating: Stable

Exxon Mobil Earnings Update

Exxon Mobil (XOM) fourth-quarter earnings exceeded market expectations as the company continued to benefit from high oil and natural gas prices, which offset weakness in chemical margins.

Fourth-quarter adjusted earnings rose to $14.0 billion from $8.8 billion the year before while full-year adjusted earnings soared to $59.1 billion from $23.0 billion in 2021. Full-year results benefited from natural gas prices and refining margins that were well above historical averages as well as multiyear high oil prices, but the strong results are also due in large part to past investments in high-margin projects and cost reductions. The latter factors should continue to support strong earnings in the coming years as well as drive the growth in earnings the company is targeting by 2027, even as commodity prices remain uncertain. Exxon plans to deliver another $2 billion in structural cost reductions in 2023 as part of its $9 billion target versus 2019.

After increasing the dividend 3% for the fourth quarter and announcing $35 billion in planned repurchases for 2023-24 in December, Exxon made no new shareholder return pledges with earnings. The market and investors might lament the lack of another increase given Chevron’s headline-grabbing large repurchase authorization and 6% dividend increase last week. However, we’d note Exxon’s latest repurchase plan represents a slight annual rate increase from the $15 billion Exxon repurchased in 2022.

We also expect Exxon’s capacity for dividend increases and share repurchases to increase at a greater amount than Chevron’s in the next few years with growth in its earnings power. Combined with a more attractive valuation, Exxon remains our preferred pick between the two. Our fair value estimate and narrow moat rating are unchanged, leaving the shares slightly overvalued.