Exxon Earnings: Delivery on Long-Term Targets Continues, Dividend Increased

Key Morningstar Metrics for ExxonMobil

• Fair Value Estimate: $135.00
• Morningstar Rating: 3 stars
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: High

What We Thought of ExxonMobil’s Earnings

ExxonMobil’s XOM third-quarter earnings of $8.6 billion surpassed market expectations thanks to the inclusion of Pioneer volumes, which drove liquids volumes to a decades high of 3.2 million barrels per day, along with progress on the delivery of structural cost savings totaling $1.6 billion in the year to date.

Why it matters: Exxon’s compelling investment case rests on its earnings growth outlook through 2027, which is a function of upstream growth, margin expansion, and cost reductions.

• Production was 4.6 million barrels of oil equivalent per day during the quarter, on track for its 2027 target of over 5.0 mmboe/d, while the normalized per-barrel margin expanded to $10/boe in the year to date from $9/boe in 2023.
• Including progress in the year to date, structural cost savings have reached $11.3 billion since 2019 and are on track for the firm’s $15 billion 2027 target.

The bottom line: Our fair value estimate of $135 per share and narrow moat rating are unchanged. Given the attractive valuation and earnings growth outlook, Exxon remains our preferred integrated oil stock.

Key stats: Exxon increased its dividend by 4% for the fourth quarter and reiterated its plans to repurchase $19 billion in shares in 2024 and $20 billion in 2025.

• The firm’s net debt/capital ratio fell to 5% from 6% in the second quarter, in contrast with some peers, demonstrating its strong cash flow.

Coming up: On Dec. 11, Exxon will provide its corporate plan update, including a focus on its upstream. We do not expect any meaningful changes to the company’s 2027 targets as it incorporates the Pioneer acquisition. Upside potential exists, given the strong progress to date.