Exxon Mobile (NYSE: XOM) shares initially opened higher but closed down due to a broad-based selloff in stocks including energy stocks. The company missed analysts' estimates on the top and bottom line, but it issued a very positive outlook about 2022. It also reported very impressive top and bottom-line growth on an annual basis due to higher energy prices.
Exxon Mobil also took a $3.4 billion writedown related to its Russian assets as these were seized by the Russian government following sanctions. Currently, the company is benefitting from strength in oil and natural gas prices, and there's little reason to believe that this bull market will end especially as Europe will have to find new sources of energy to end its reliance on Russian energy.
Inside the Numbers
In Q1, Exxon Mobile reported $1.28 in earnings per share which fell short of analysts' predictions of $2.01 per share. Revenue also fell short of expectations at $90.5 billion vs $92.8 billion.
Most of the miss is due to its largest segment, Upstream, which reported $4.5 billion in net income, while analysts were expecting $8 billion. Despite this miss, revenue was 52% higher, while its net income tripled compared to last year.
The biggest headline was the $3.4 billion write-offs of its Russian natural gas and pipeline assets. However, the company said that this project wasn't a meaningful contributor to its top or bottom line and equates to about 2% of total assets.
The company also announced that it would be increasing its share buybacks to $30 billion from its previous $10 billion. This is about 8% of the market cap and should increase the attractiveness of shares for value investors especially coupled with its 4% dividend.
This continues a trend among energy companies who are choosing to use their excess cash flow to retire debt or buy back stock rather than invest in new production. As long as this behavior persists, it increases the duration of the bull market.
Despite its big gains over the past year, Exxon remains quite cheap with a forward P/E of 11. Since early March, when oil peaked at around $135, the stock has been trading in a tight range between $80 and $90 and demonstrating relative strength to oil. Its strong earnings momentum and bullish conditions for oil increase the likelihood that the stock will break out to new highs, although there could be more weakness first if market volatility persists.