Exxon Mobil
Inside the Numbers
In Q2, Exxon Mobil reported earnings per share of $1.10 which topped expectations of $0.96 per share. This was an impressive turnaround from last year's Q2 loss of $0.26 per share. Of course, this loss was largely due to the shutdowns which caused oil prices to plunge and gasoline demand to be artificially depressed.
Revenue also handily beat expectations at $67.7 billion, a 108% increase from last year's Q2, while analysts were forecasting $61.6 billion. Exxon's upstream segment's net income also beat expectations at $3.2 billion vs analysts' expectations of $3.1 billion. This segment is involved in the exploration and development of oil and natural gas properties as well as the extraction and production of crude oil and natural gas and is the most sensitive to oil prices.
In total, the company generated $9.7 billion in cash in the quarter which is particularly impressive given the company's valuation of $245 billion. Management said it would use its cash to fund its dividend, capital investments, and reduce debt.
The company produced the equivalent of 400,000 barrels per day, mainly from the Permian basin, an increase of 34% from 2020's Q2. Its chemicals division was also a standout with $2.3 billion with gains primarily from higher pricing power.
Stock Price Outlook
Exxon's stock is really interesting here. It's basically priced as if oil prices are bound to drop, and inflationary pressures will be transitory. If this turns out to not be the case then the stock could be a great buy at current prices especially as it has a 6% dividend.
While the stock is up by nearly 60% since its March 2020 low, it could be argued that it's a better buy now as earnings are up by a greater margin than the stock price. If oil prices can stay above $70 then it's likely that Exxon will generate more than $30 billion in free cash flow.
For these reasons, Exxon remains a great buy at current levels.
