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Exxon Earnings Exceed Expectations As New Projects and Cost Reductions Take Hold

High oil and gas prices continue to bolster margins and boost earnings, shares fairly valued.

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Exxon Mobile Stock at a Glance:

ExxonMobil XOM posted record first-quarter earnings that exceeded market expectations as the company continued to benefit from high oil and natural gas prices, strong refining margins, and contributions from new projects. First-quarter adjusted earnings rose to $11.6 billion from $8.8 billion the year before largely on stronger downstream earnings. Cost savings also contributed as Exxon has now delivered $7.2 billion of savings since 2019 and is on track to achieve its $9 billion target by year-end. Production increased to 3,831 thousand barrels of oil equivalent per day compared with 3,675 mboe/d a year ago, but grew nearly 300 mboe/d excluding divestments and Sakhalin-1 expropriation, thanks largely to growth in the Permian and Guyana.

During the quarter, Exxon paid dividends of $3.7 billion and repurchased $4.4 billion of shares as part of its total targeted repurchase program of $35 billion by end-2024. Net debt/capital fell to 4% at the end of the quarter.

Our $118 fair value estimate and narrow moat rating are unchanged, leaving shares fully valued as they trade near all-time highs. Aside from valuation, we think Exxon remains a compelling option among integrated oils given its underlying earnings growth, supported by ongoing cost reductions and new projects through 2027. This should translate into growing shareholder distributions as well.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Allen Good

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Allen Good, CFA, is a director for Morningstar Holland BV, a wholly owned subsidiary of Morningstar, Inc. Based in Amsterdam, he covers the oil and gas industries. He is also chair of the Morningstar Research Services Economic Moat Committee, a group of senior members of the equity research team responsible for reviewing all Economic Moat and Moat Trend ratings issued by Morningstar.

Before joining Morningstar in 2008, he performed merger and acquisition advisory work for a middle-market investment bank. Before that, he spent several years at Black & Decker in various operational roles.

Good holds a bachelor’s degree in business from the University of Tennessee and a master’s degree in business administration from Kenan-Flagler Business School at the University of North Carolina. He also holds the Chartered Financial Analyst® designation.

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