Exxon Mobil Corporation (NYSE: XOM) Stock Analysis

Market Capitalization: $522.84 Billion
Shares Outstanding: 4.40 Billion
Sector: Energy
Industry: Integrated Oil & Gas
Analysis as of November 5, 2024

1. Company Overview

Exxon Mobil Corporation is one of the world’s largest publicly traded international oil and gas companies. Founded in 1870 and headquartered in Irving, Texas, Exxon Mobil engages in the exploration, production, transportation, and sale of crude oil and natural gas. The company operates through several segments:

• Upstream: Exploration and production of crude oil and natural gas.
• Downstream: Refining and marketing of petroleum products.
• Chemical: Manufacturing and marketing of petrochemicals.

Strategic Highlights:

• Global Presence: Operations in numerous countries across six continents.
• Diverse Portfolio: A balanced mix of upstream, downstream, and chemical businesses.
• Investment in Technology: Focus on technological innovation to improve efficiency and reduce environmental impact.
• Energy Transition Initiatives: Investments in lower-emission energy solutions, including carbon capture and biofuels.

2. Financial Performance

a. Revenue and Growth

• Trailing Twelve Months (TTM) Revenue (as of September 30, 2024): $344.37 Billion
• Year-over-Year (YoY) Revenue Growth (TTM): -1.43%

Analysis:

• Revenue Fluctuations: The company experienced significant revenue volatility due to changes in oil and gas prices, market demand, and global economic conditions.
• Recent Decline: A slight decrease in TTM revenue indicates potential challenges in the market or reduced production volumes.
• Market Factors: Global economic uncertainties and energy market dynamics may have impacted sales.

b. Profitability

• Net Income (TTM): $33.70 Billion
• Earnings Per Share (EPS, TTM): $8.03
• Net Income Growth (YoY): -18.06%
• Profit Margin: 9.79%
• Return on Equity (ROE): 14.51%
• Return on Assets (ROA): 7.17%

Analysis:

• Decrease in Net Income: Net income declined by 18.06% YoY, reflecting lower profitability.
• Strong Profit Margin: A profit margin of 9.79% indicates solid profitability relative to revenue.
• Healthy ROE and ROA: Returns suggest efficient use of equity and assets to generate earnings.
• Earnings Stability: Despite fluctuations, Exxon Mobil maintains profitability through cost management and operational efficiencies.

c. Margins

• Gross Margin (TTM): 31.64%
• Operating Margin (TTM): 13.89%
• EBITDA Margin (TTM): 20.93%

Analysis:

• Stable Gross Margin: Consistent gross margins indicate effective control over production costs.
• Operating Efficiency: An operating margin of 13.89% reflects the company’s ability to manage operating expenses.
• EBITDA Margin: Healthy EBITDA margin supports strong cash flow generation.

d. Cash Flow

• Operating Cash Flow (TTM): $56.48 Billion
• Capital Expenditures (CapEx, TTM): – $23.70 Billion
• Free Cash Flow (FCF, TTM): $32.78 Billion
• Free Cash Flow Margin: 9.52%
• Free Cash Flow Per Share: $7.46

Analysis:

• Robust Cash Generation: Strong operating cash flow enables funding for investments, dividends, and share repurchases.
• Significant CapEx: High capital expenditures reflect ongoing investments in exploration and production.
• Positive Free Cash Flow: Provides financial flexibility for strategic initiatives and shareholder returns.

3. Balance Sheet

• Total Assets (as of September 30, 2024): $461.92 Billion
• Total Liabilities: $185.52 Billion
• Shareholders’ Equity: $276.40 Billion
• Total Debt: $42.55 Billion
• Cash and Cash Equivalents: $26.93 Billion
• Net Debt Position: -$15.62 Billion
• Debt-to-Equity Ratio: 0.15
• Current Ratio: 1.35
• Quick Ratio: 0.98

Analysis:

• Strong Equity Base: High shareholders’ equity indicates financial stability.
• Manageable Debt Levels: Low debt-to-equity ratio suggests conservative leverage.
• Liquidity Position: Current and quick ratios indicate adequate liquidity to meet short-term obligations.
• Negative Net Debt: The company has more debt than cash, but the level is manageable given its cash flows.

4. Valuation

• Current Stock Price (as of November 5, 2024): $118.96
• Price-to-Earnings (PE) Ratio (TTM): 14.82
• Forward PE Ratio: 15.24
• Price-to-Sales (PS) Ratio: 1.45
• Price-to-Book (PB) Ratio: 1.95
• Price-to-Free Cash Flow (P/FCF) Ratio: 15.95
• Enterprise Value (EV): $546.27 Billion
• EV/EBITDA Ratio: 7.58
• EV/Sales Ratio: 1.59

Analysis:

• Moderate Valuation Multiples: PE and EV/EBITDA ratios are reasonable, indicating the stock may be fairly valued.
• Price Ratios: PS and PB ratios are in line with industry averages.
• Dividend Yield: The stock offers a dividend yield of 3.33%, which is attractive for income-focused investors.
• Valuation Considerations: The valuation reflects market expectations of steady earnings and cash flow.

5. Market Performance

• 52-Week Range: $95.77 – $126.34
• 52-Week Price Change: +10.37%
• Beta: 0.88

Analysis:

• Positive Stock Performance: The stock has appreciated over the past year, indicating investor confidence.
• Lower Volatility: A beta less than 1 suggests the stock is less volatile than the overall market.
• Trading Range: The stock is trading closer to its 52-week high, which may indicate bullish sentiment.

6. Financial Health and Risks

a. Liquidity

• Current Ratio: 1.35
• Quick Ratio: 0.98

Analysis:

• Adequate Liquidity: Ratios suggest the company can meet its short-term liabilities.
• Inventory Levels: Significant inventories require monitoring to ensure efficient turnover.

b. Leverage

• Total Debt: $42.55 Billion
• Debt-to-Equity Ratio: 0.15
• Interest Coverage Ratio: 49.25

Analysis:

• Low Leverage: Conservative debt levels reduce financial risk.
• High Interest Coverage: Ability to cover interest expenses multiple times over indicates strong financial health.

c. Profitability and Efficiency

• Return on Equity (ROE): 14.51%
• Return on Assets (ROA): 7.17%
• Return on Invested Capital (ROIC): 10.53%
• Asset Turnover: 0.83
• Inventory Turnover: 9.74

Analysis:

• Efficient Operations: Strong returns indicate effective use of capital and assets.
• Asset Utilization: High asset turnover reflects efficient revenue generation from assets.
• Operational Efficiency: Inventory turnover suggests effective inventory management.

d. Operational Risks

• Commodity Price Fluctuations: Profitability is highly sensitive to oil and gas price changes.
• Regulatory Environment: Stringent environmental regulations could increase compliance costs.
• Capital-Intensive Industry: Requires significant ongoing investments in infrastructure and exploration.
• Geopolitical Risks: Operations in politically unstable regions may pose risks.

e. Market Risks

• Economic Cyclicality: Demand for oil and gas is influenced by global economic conditions.
• Competition: Faces competition from other integrated oil companies and alternative energy sources.
• Energy Transition: Shift towards renewable energy may impact long-term demand for fossil fuels.

7. Conclusion

Pros:

• Strong Financial Position: Solid balance sheet with manageable debt and strong equity.
• Consistent Profitability: Maintains profitability despite market volatility.
• Attractive Dividend Yield: Provides steady income for investors.
• Operational Efficiency: Effective cost management and high returns on capital.
• Global Diversification: Operations across multiple regions reduce reliance on any single market.

Cons:

• Exposure to Commodity Prices: Earnings are sensitive to fluctuations in oil and gas prices.
• Regulatory and Environmental Risks: Potential for increased costs due to environmental regulations.
• Energy Transition Challenges: Long-term shifts towards renewable energy may reduce demand.
• Capital Expenditure Requirements: High CapEx may limit free cash flow in periods of low commodity prices.

Disclaimer:

This analysis is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. Investing involves risks, including the potential loss of principal. Past performance is not indicative of future results. Investors should conduct their own research or consult a qualified financial advisor before making investment decisions.