Exxon Earnings: Past Investments to Bolster Refining Positions Pay Off

Key Morningstar Metrics for Exxon Mobil

• Fair Value Estimate
  : $162.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : Narrow
• Morningstar Uncertainty Rating
  : High

What We Thought of Exxon Mobil’s Earnings

ExxonMobil’s XOM third-quarter adjusted earnings exceeded expectations, with sequential growth driven by stronger global refining margins that offset the dip in oil prices. The company plans to repurchase $20 billion in shares in 2027, in line with 2026 levels.

Why it matters: Its large, high-quality downstream asset base has long set Exxon apart from peers. Investments during the last five years have extended its advantage by reducing costs, growing capacity, and increasing distillate yields, including 40% volume growth on the Gulf Coast. During the quarter, this paid off as Exxon capitalized on strong global refining margins to drive earnings higher.

• The company continues to high-grade its portfolio, reaching $16.9 billion in cumulative structural cost savings since 2019 and on track for its $20.0 billion 2030 target.

The bottom line: Our $162 fair value estimate and Narrow Morningstar Economic Moat Rating are unchanged. Exxon remains among the best-positioned of its peers to benefit from currently strong refining margins, given its relatively large downstream footprint. However, we see this improvement as largely baked into the share price. Any pullback from weaker commodity prices would be an opportunity.

• Exxon remains one of the best-positioned of its peers to benefit from currently strong refining margins, given its relatively large downstream footprint. Refining margins are likely to remain higher for longer than oil and natural gas prices, considering the high number of global refining outages and the now-low inventory levels that need to be rebuilt.
• Management indicated that 2027 repurchases would likely not be ratable across quarters to maximize effectiveness. Since the share price is above our fair value estimate, we don’t mind management trying to time volatility to ensure repurchases aren’t made when shares look most expensive.