The global energy market is presently shaped by geopolitical tensions, technological advancements, and evolving environmental policies, resulting in price volatility. This drives global oil and gas industry players to innovate and focus on sustainability to manage the challenges of supply disruptions, regulatory pressures, and shifting consumer preferences.
The OPEC+ group recently agreed to extend their official crude output cuts into 2025. Moreover, a subset of the OPEC+ alliance, including Saudi Arabia and Russia, is expected to extend nearly 1.7 million barrels per day set of voluntary cuts that were set to expire at the end of this year.
On the other hand, Saudi Arabia Energy Minister Prince Abdulaziz bin Salman stated that the cuts could be pulled back or reversed if prices falter. The market did not take to this news favorably, and oil prices experienced a selloff. Portfolio manager Eric Nuttall believes that this selloff was not justified.
This is mainly because oil demand is still increasing. According to the International Energy Agency (IEA), global oil demand is set to rise by 1.1 mb/d in 2024. Moreover, the U.S. Energy Information Administration (EIA) expects Brent crude oil spot price near $90 per barrel for the remainder of 2024.
Against this backdrop, let’s compare two energy stocks, Exxon Mobil Corporation (XOM) and Chevron Corporation (CVX), to analyze their long-term Value this year and beyond.
The Case for Exxon Mobil Corporation Stock
Valued at $505.79 billion by market cap, Exxon Mobil Corporation (XOM) engages in the exploration and production of crude oil and natural gas in the United States and internationally. It operates through Upstream; Energy Products; Chemical Products; and Specialty Products segments.
XOM’s stock has gained 3.9% over the past year to close the last trading session at $112.75. Over the past month, the stock has plunged 2.9%.
On May 3, 2024, XOM announced it had closed its acquisition of Pioneer Natural Resources Company (PXD).
The merger between XOM and Pioneer establishes an unconventional business with the highest potential for high-return development in the Permian Basin. The combined company's holdings, exceeding 1.4 million net acres in the Delaware and Midland basins, are estimated to contain 16 billion barrels of oil equivalent resources.
In terms of forward EV/Sales, XOM is trading at 1.32x, 33.3% lower than the industry average of 1.98x. Its forward Price/Sales multiple of 1.28 is 9.8% lower than the industry average of 1.42. However, the stock’s forward EV/EBITDA of 5.95x is 2.1% higher than the industry average of 5.83x.
XOM’s trailing-12-month levered FCF margin of 7.88% is 28.8% higher than the industry average of 6.12%. However, the stock’s trailing-12-month EBIT margin of 13.96% is 27.5% lower than the industry average of 19.24%.
During the first quarter, which ended March 31, 2024, XOM’s total revenues and other income stood at $83.08 billion. Its net income attributable to XON was reported at $8.22 billion, and earnings per common share was $2.06.
In addition, as of March 31, 2024, the company’s total assets stood at $377.92 billion, compared to $376.32 billion as of December 31, 2023.
Street expects XOM’s revenue for the second quarter (ending June 2024) to increase 6.1% year-over-year to $87.96 billion. The company’s EPS is estimated to grow 21.7% year-over-year to $2.36 for the same quarter.
XOM’s POWR Ratings reflect a mixed outlook. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
XOM has a C grade for Growth and Stability. It is ranked #37 among 80 stocks in the Energy - Oil & Gas industry.
Click here for the additional POWR Ratings for XOM (Value, Growth, Momentum, Sentiment, and Quality).
The Case for Chevron Corporation Stock
With a $285.44 billion market cap, Chevron Corporation (CVX) engages in integrated energy and chemicals operations internationally. It operates through two segments: Upstream; and Downstream. The company is involved in the exploration, development, production, and transportation of crude oil and natural gas.
CVX’s stock has declined 4.1% over the past month but gained 9.6% over the past six months to close the last trading session at $156.08.
On April 25, CVX’s affiliate Tengizchevroil LLP commenced operations at its Wellhead Pressure Management Project (WPMP) in Kazakhstan's Tengiz oil field. The WPMP is designed to maintain the existing processing plants’ full capacity of around 28 million tonnes per annum. This marks a significant step toward completing the Future Growth Project (FGP).
On April 4, CVX’s division Chevron New Energies (CNE) announced a lead investment in ION Clean Energy, a Boulder-based technology company that provides post-combustion point-source capture technology through its third-generation ICE-31 liquid amine system.
CNE will use ION’s ICE-31 technology to service customers with high volume and low concentration CO2 emissions. The investment also allows CNE to partner with ION customers on projects to scale the technology sooner.
In terms of forward EV/Sales, CVX is trading at 1.52x, 23.3% lower than the industry average of 1.98x. Its forward EV/EBIT multiple of 8.93 is 6.4% lower than the industry average of 9.54. However, the stock’s forward Price/Sales of 1.44x is 1.1% higher than the industry average of 1.42x.
CVX’s trailing-12-month levered FCF margin of 7.66% is 25.2% higher than the industry average of 6.12%. However, the stock’s trailing-12-month gross profit margin of 39.52% is 11.2% lower than the industry average of 44.51%.
CVX reported total revenues and other income of $48.72 billion during the first quarter that ended March 31, 2024, of which its sales and other operating revenues were $46.58 billion for the quarter. Its total earnings increased 143.5% from the prior quarter to $5.50 billion, of which its Upstream earnings rose 230.3% to $5.24 billion over the same period.
However, the company’s adjusted earnings declined 14.8% and 17.5% year-over-year to $5.42 billion and $2.93 per share, respectively.
Analysts expect CVX’s revenue for the second quarter (ending June 2024) to increase 7.5% year-over-year to $52.56 billion. Its EPS for the current quarter is expected to grow 7.3% year-over-year to $3.30. Moreover, the company topped consensus EPS estimates in three of the trailing four quarters.
CVX’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall C rating, translating to a Neutral in our proprietary rating system.
The stock has a C grade for Growth. CVX is ranked #46 in the same industry.
In addition to the POWR Ratings I’ve just highlighted, you can see CVX’s ratings for Value, Momentum, Quality, Sentiment, and Stability here.
Exxon Mobil (XOM) vs. Chevron (CVX) - Analyzing Long-Term Value in 2024 and Beyond
The energy sector is thriving, propelled by evolving policies and regulations, numerous innovations in energy production and distribution technology, and increasing demand for energy worldwide as populations grow and economies develop.
Both XOM and CVX stand to benefit from the industry’s tailwinds. However, given their mixed fundamentals, waiting for better entry points in these stocks could be wise now.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Energy - Oil & Gas industry here.
What To Do Next?
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XOM shares closed at $112.75 on Friday, down $-1.22 (-1.07%). Year-to-date, XOM has gained 14.75%, versus a 12.70% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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