Why ExxonMobil shares rose 6.5% in morning trading

What happened

Shares of integrated oil majors ExxonMobil (NYSE: XOM) were higher by about 6.5% at one point in morning trade Tuesday. The company’s earnings announcement, released before markets opened, was the driving force here. But the actual results were probably less important than the other things management said.

So what

Oil and natural gas prices have been quite high for some time, and investors have essentially turned to Exxon’s Q4 2021 earnings expecting to hear good numbers.

They weren’t disappointed, with the company reporting revenue of nearly $85 billion, up from $46.5 billion in the same quarter of 2020. Adjusted earnings were $2.05 per share, versus adjusted earnings. of $0.03. Both figures beat analysts’ expectations, which had forecast revenue of $82.4 billion and earnings of $1.96 per share. Investors like when a company beats expectations, so it was good news overall, but the good quarter was still not a shocking development given recent commodity strength in oil and natural gas. .

Image source: Getty Images.

What was more noteworthy was the company’s guidance. First, the day before the earnings release, Exxon announced plans to streamline its business structure and place greater emphasis on clean energy. Today he provided more clarity on some of his plans, including his intention to continue working on cost reductions and to keep annual capital spending within the range of $21 billion to $24 billion, below pre-pandemic projections.

However, this spending plan includes the intention to increase terrestrial energy production in the Permian Basin by up to 25%. The company has also launched a $10 billion share buyback plan which is expected to be completed over the next 12 to 24 months.

The key here is that high energy prices and moderating spending are likely to support strong cash flow that can be used for other purposes. These include continued debt reduction, share buybacks and the payment of the company’s dividend, which looks increasingly safe. Investors have had all of these things on their minds for some time, and it seems Wall Street is happy with how the energy giant is choosing to handle these moves now that energy prices have recovered.

Now what

Exxon, like many of its peers, has seen a significant rally in stock prices since the early lows of the pandemic. That said, the yield is still quite generous at 4.6%. As one of the largest integrated energy majors in the world, this is an interesting title for those looking for an oil and gas game.

That said, it hasn’t moved as fast in the clean energy space as some of its European peers. However, if you want to focus more on oil, this approach could be exactly what you are looking for, with today’s earnings showing just how well the company can fare when commodity prices are high.

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Reuben Gregg Brewer has no position in the stocks mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.

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