Exxon Earnings: Earnings Exceed Expectations as Concerns on Spending Seem to Weigh on Shares

Key Morningstar Metrics for Exxon Mobil

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

What We Thought of Exxon Mobil’s Earnings

Exxon Mobil’s XOM fourth-quarter earnings of $7.4 billion surpassed market expectations. For the full year, Exxon produced 4.3 mmboed, including a record 1.2 mmboed from the Permian. At year-end, it had reduced structural costs by $12 billion since 2019.

Why it matters: Exxon’s strong performance relative to expectations demonstrates that it is on track with its long-term plans announced in December. Quarterly performance may vary, but Exxon continues to deliver on key metrics that instill confidence in its investment case of higher spending and earnings growth.

• The record Permian volumes support Exxon’s aims to grow volumes to 5.4 mmboed by 2030, led by high-margin volumes from Guyana, the Permian, and LNG, resulting in improved unit margins and falling investment rates through 2030.
• Exxon delivered on its initial targets and expects to achieve another $6 billion in structural cost reductions by 2030, bringing the total to $18 billion since 2019.

The bottom line: Our $135 fair value estimate and narrow moat rating are unchanged. Exxon has underperformed peers since its strategic update in December, despite an improving commodity price environment. This is likely a result of concerns about its plan to increase spending during the next five years.

• Although higher spending from an oil company is always cause for alarm, we think Exxon’s track record and portfolio quality should allay fears. As such, we see shares as compelling.
• Adding higher-margin volumes in the Permian and Guyana will mean reinvestment rates fall over time. Meanwhile, low emissions spending appears measured and focused on areas where Exxon has expertise and where there is policy support.

Key stats: Exxon repurchased $19 billion in shares in 2024 and will repurchase $20 billion in 2025 and 2026. At year-end, the net debt-to-capital ratio ticked up to 6%, but it remains very low.