Exxon Mobil (NYSE: XOM) posted Q3 results that exceeded estimates on the bottom line but fell short on the top line. Shares were initially unchanged but then rallied in the following sessions. Overall, Exxon Mobil has had a strong 2021 with a YTD gain of 55%.
The recovery in oil prices has put the company firmly back into the green, and it even announced a $10 billion share buyback. It was the most profitable quarter for the company in many years. In the conference call, management attributed the strength to strong gasoline demand, rising oil prices, and more streamlined operations.
Inside the Numbers
In Q3, Exxon Mobil reported $1.58 per share in earnings which topped expectations of $1.56 per share. Revenue came in at $73.8 billion, while analysts were looking for $76.3 billion. This was the highest quarterly EPS figure since 2014 and a significant improvement from last year's Q3 of $45 billion in revenue and a loss of $0.16 per share.
The company had a cash flow of $12.1 billion during the quarter which it is using to fund capital investments, reduce debt, and dividend payments. Last week, the company announced an increase to its dividend payment of $0.88 per share. It also announced a $10 billion share buyback over the next 1 to 2 years.
Like other oil companies, Exxon is remaining disciplined despite the influx of cash. They continue to cut costs, and capital spending in 2021 will come in just above $16 billion which is the lower end of its range. Despite higher prices, the company isn't eagerly investing in new projects. Currently, it's producing about 3.7 million barrels per day.
Stock Price Outlook
While some may be distracted by the revenue miss and the soft earnings beat, Exxon's earnings were quite impressive especially its $12 billion in free cash flow. Over a full year, this would equate to almost 20% of Exxon's total market cap which implies much higher dividends and share buybacks in the future.
Therefore, if an investor is bullish on oil or believes it will remain near current levels, then Exxon Mobil is one of the highest-quality energy stocks, providing diversified exposure and less risk than most other energy stocks.