Exxon Mobil (XOM) is building a base as it approaches third-quarter earnings in the midst of inflamed oil prices. This Big Cap 20 oil giant is a stock to watch.
Exxon stock is forming a consolidation with a buy point of 105.67. Investors can also look at the stock chart as an oddly shaped cup with a new handle that offers a 103.42 entry, according to MarketSmith chart analysis. Previously, Exxon successfully cleared a cup with handle in early May with a buy point of 89.90.
Volume on the stock was low on Friday as the stock fell 2.6%. XOM has climbed over the past couple of weeks, crossing its 50-day moving average and its 21-day exponential moving average. It is well above its 200-day line. The recent agreement by OPEC+ to cut oil production and the fighting in Ukraine are partly responsible for Exxon’s continued success.
The relative strength line is still holding up at new highs, an encouraging sign.
XOM stock has a perfect Composite Rating of 99. XOM’s EPS Rating is a mediocre 80, which partly reflects a loss in 2020.
Exxon is ranked No. 1 in IBD’s integrated oil & gas industry group, ahead of other top-ranked companies like Norway’s Equinor (EQNR), Marathon Oil (MRO) and Argentina’s state-run YPF (YPF).
Exxon Reports Tentative Operating Profit
Improving earnings performance gives added credibility to a bullish outlook on Exxon Mobil stock.
Early in the year, rising inflation and Russia’s invasion sent oil prices higher, as the West turned away from Russian supply and the markets worried about shipping disruptions.
But U.S. crude oil prices have fallen since peaking at about $130 per barrel on March 7. On Thursday, oil prices rose again to around $89 a barrel, still near their lowest level since January.
That comes in spite of the fact that Russian President Vladimir Putin threatened to use nuclear weapons in his attack on Ukraine and after Kyiv reconquered some lands from Russia over the past few weeks.
Meanwhile, Exxon reported its operating profit could come in at around $11 billion in the third quarter, according to federal filings made earlier this month. That would be up sharply from $6.7 billion a year earlier, but a significant drop from the record $17.6 billion in operating profit from Q2.
Expected earnings on most energy stocks in the third quarter outshine other stocks. Exxon is one of those standout energy stocks.
Exxon built a huge cash flow and has reinvested that money in its refinery business and in shale deposits. And it increased its annual dividend to $15 billion, or $3.52 per share. Exxon is in a prime spot to give money back to shareholders now and in the future.
Upcoming Earnings Could Boost Exxon Stock
Wall Street upped its estimates for XOM’s third-quarter to include earnings per share of $3.68 and $107.2 billion in revenue, according to FactSet. Exxon is scheduled to announce Q3 earnings around Oct. 28.
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The company earned $4.14 billion in the second quarter on sales of $115.7 billion, easily beating Wall Street’s forecasts. Earnings soared 276% over the same period a year earlier, and sales increased 70%.
The average price of gas in the U.S. is once again rising, helping Exxon’s bottom line for its refinery and marketing business. Unleaded gas was quoted Thursday at $3.91, up from $3.71 a month ago. It rocketed past $5 a gallon as the summer began, according to AAA data.
Exxon has been investing in its refining business, including projects in the Netherlands and Texas. Exxon also announced it made two more discoveries in July off the coast of Guyana, bringing the total to seven oil well discoveries in and around the site.
Exxon has become a bigger shale player, increasing its holdings in the Permian Basin of Texas and New Mexico.
Follow Michael Molinski on Twitter @IMmolinski
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