ExxonMobil: Limited Risk and Lots of Reward With This Oil Play

Key Points

• ExxonMobil's share price has several catalysts that could drive it higher in 2025.
• Ramping production and operational quality ensure capital return safety. 
• Analysts and institutions provide substantial market support. 

ExxonMobil NYSE: XOM faces risks like any other company, but those risks are relatively limited compared to its peers.

Over the past few years, the company's efforts have included repositioning, ramping up production, and improving operational quality, which have driven a robust cash flow despite the decline in oil prices.

The cash flow enables a solid capital return and growth, with no signs of slowing. The company’s goal is to launch at least ten new projects, including critical locations in the Permian, Guyana, and Indonesia, which are forecasted to add $3 billion to the bottom line this year, with further growth expected next year. 

Analysts' Sentiment Firms Ahead of Arbitration Announcement 

ExxonMobil has a catalyst in an upcoming arbitration announcement that could significantly boost its stock price, regardless of the outcome. The arbitrator has decided the claims regarding the Hess NYSE: HES/Chevron NYSE: CVX merger and will announce the decision soon. The outcome will either allow the Hess/Chevron merger to advance, have little impact on Exxon, or not, which opens the door to another growth opportunity.

Exxon’s claim is for the right of first refusal; if the decision is in its favor, the company can add another substantial block to its Guyana portfolio, further increasing oil production. 

The analysts' sentiment trends reflect a high and rising level of confidence in this company. The trends include increased coverage compared to 2024, firming sentiment with a consensus rating pegged at Moderate Buy, and a steady price target forecasting a 10% upside at the midpoint. The $125.50 target is a significant technical level, aligning with the top of the existing trading range and likely serving as a pivot point for this market. 

The Q2 earnings report is another likely catalyst to drive this stock higher. Analysts are forecasting a substantial 14% decline in revenue and tighter margins, despite resilient economic data and consumer habits. Labor and spending data reflect year-over-year gains, a driving force behind U.S. economic activity, positioning the company to outperform its estimates.

ExxonMobil’s Capital Return Is Safe for 2025

ExxonMobil broke industry trend when it affirmed the pace of buybacks would continue in 2025. Others, like Chevron, reduced or suspended their buybacks in response to tightening margins and cash flow.

There is some risk for ExxonMobil investors, as Q1 capital returns outpaced net income; however, the shortfall is offset by sufficient cash flow and free cash flow, which enable the maintenance of balance sheet health while capital is returned to shareholders and new projects are developed. 

The capital return is substantial, including the dividend, which yields about 3.5% at mid-year. The buybacks are also considerable, equalling roughly 1% of the market cap with the stock trading near $110.

The primary risk is that the pace of buybacks will slow, but that isn’t expected until the next fiscal year, if at all.

Regardless of the pace, buybacks positively influence shareholder value and will help leverage the stock price to new highs over time.

Institutional Support for ExxonMobil Is Strong in 2025

The institutional trends indicate that support for ExxonMobil is expected to remain strong in 2025. The data reported by MarketBeat indicates that ownership exceeds 60% and has been increasing on a quarterly basis this year. This is a tailwind for the market that can help it rise over the long term and diminish the impact of pullbacks when they occur. 

The chart action reveals the cumulative support of analysts and institutions. The price has trended sideways within a narrow range since 2022, showing consistent support at the $110 level, sufficient for the long-term EMAs to catch up with it. The long-term EMAs are a critical factor that is likely to push the price action higher over time. Resistance at the range’s top could be tested before the end of the year.