Exxon Mobil Corporation (XOM) posted better-than-expected Q2 results. The outstanding performance of the Chemicals business and prudent cost management were the primary drivers.
However, shares of the global oil and gas corporation decreased 2.3% to close at $57.57 on July 30, following the cautious comments of the management about rewarding shareholders. Apparently, some investors are unhappy that the company will use its cash to pay down debt instead of increasing dividends.
The company reported Q2 earnings of $1.10 per share and beat analysts’ expectations of $0.97. A loss of $0.26 per share was reported in the prior year quarter.
In more positive news, total revenues of $67.7 billion surpassed the Street’s estimates of $65.02 billion and more than doubled from the year-ago period. Capital and Exploration expenditures came in at $3.8 billion, down 39.5% year-over-year.
On a negative note, the company’s oil-equivalent production was 3.6 million barrels per day, down 2% from year-over-year, impacted by a rise in maintenance activity. On the other hand, Chemical reported earnings of $2.3 billion in the quarter, marking the best-ever quarterly earnings. (See Exxon Mobil stock charts on TipRanks)
Exxon Mobil CEO Darren Woods said, “We’re realizing significant benefits from an improved cost structure, solid operating performance and low-cost of-supply investments that, together, are generating attractive returns and strong cash flow to fund our capital program, pay the dividend and reduce debt. This was particularly true for our Chemical business that delivered their best quarter in company history.”
Recently, Piper Sandler analyst Ryan Todd maintained a Hold rating but increased the stock’s price target to $69 (19.9% upside potential) from $63.
In a note to investors, Todd said that upstream valuations remain “severely discounted.” Free cash flow yields of 14%, a rise in shareholder distributions, and crude balances for the second half of 2021 reflect “upwards risk to the forward oil curve,” the analyst added.
The rest of the Street is cautiously optimistic about the stock, with a Moderate Buy consensus rating. That’s based on 7 Buys, 6 Holds, and 1 Sell. The average Exxon Mobil price target of $69.71 implies 21.1% upside potential to current levels. Shares have increased 32.2% over the past six months.
Overall, Exxon Mobil scores a 9 of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
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