ExxonMobil Boosts Dividend After Posting Earnings Results for Q3 That Beat Expectations

Exceeding market expectations, ExxonMobil (XOM) reported earnings for the third quarter that again sharply increased from the year before as well as the second quarter. Although commodity prices and refining margins remain above recent historical averages, the record results are also due in part to past investments in high-margin projects and cost reductions. Third-quarter adjusted earnings soared to $18.7 billion from $6.8 billion the year before.

Although there was no change to the existing share-repurchase program of $30 billion through 2023, Exxon increased its per share dividend by $0.03 or 3.4%, greater than the $0.01 increase last year. During the quarter, it returned $8.2 billion to shareholders: $3.7 billion in dividends and $4.5 billion of repurchases.

While debt/capital has fallen to 19% (7% net debt), below management’s target, Exxon remains relatively conservative about increasing the repurchase authorization. However, with a share price near all-time highs and a potential recession looming, shareholders should appreciate this caution, as the strong financial health should allow for repurchases to continue at more attractive prices through the next downcycle. That said, the current outlook suggests commodity prices will remain high, given strong demand and short supply, which portends continued strong earnings and cash flow.

Our fair value estimate and narrow moat rating are unchanged, leaving the shares slightly overvalued.