Why Energy Stocks Like Exxon and Hess Are Back in Focus

Key Points

• After power outages left Portugal and Spain in the dark, the world might have woken up to the fact that fossil fuels are still necessary.
• Three names stand out in potential upside for the coming years as this event creates better expectations.
• Wall Street analysts and institutional buyers agree as their actions call for upside moves.

Sometimes, the market experiences a new turn of events, creating opportunities for investors who know what to watch out for in their market scans. Of course, these plays only become obvious when it is too late to act upon them. Today, it seems that the opportunity is spread out across a multi-year time horizon for the energy sector due to some recent events in Europe.

During the last week of April 2025, Portugal and Spain experienced a power outage due to overreliance on renewable energy. The world realized that it is too early in the adoption curve to start fully relying on renewable energy like solar and wind, since most power grids worldwide aren’t developed enough to withstand this sudden change.

After this event, things became clear about the state of global energy sources. Infrastructure still relies on traditional fossil fuel sources, which is where leaders like Exxon Mobil Co. NYSE: XOM and other international players like Hess Co. NYSE: HES come into play. They deliver retail investors with an opportunity that might span several years into the future, and it seems markets are aware of this.

Confidence is Still High For Exxon Mobil

Exxon Mobil's highly awaited quarterly earnings report was released. It showed a better-than-expected turnout despite the multi-month decline in crude oil prices, which could have acted as a major headwind for its bottom-line earnings per share (EPS).

However, investors can look to one factor to reiterate their confidence in the company's future despite lower oil prices. That factor is management's decision to maintain the company’s share buyback program despite a slump in energy markets.

In any case, share buybacks have two implications. First, they mean that company insiders believe the stock’s valuation is significantly below the perceived fair value, creating an opportunity to compound and deploy some of the company’s excess free cash flow (operating cash flow minus capital expenditures).

Another implication is that there is a pretty strong outlook for higher prices ahead, something Wall Street analysts agree with. Particularly those from Barclays, who reiterated their Overweight rating on Exxon Mobil stock as of April 2025, placing a valuation target of up to $130 per share on it as well. That’s 23% upside from today.

Capital is Warming Up to Hess Stock

Understanding that this European blackout event only creates awareness, or a sort of warning, for the current belief that modern economies can part with fossil fuels, some new willing buyers have been coming into Hess stock lately. Those from the Bank of New York Mellon decided to boost their holdings in Hess stock by as much as 22.2% as of late April 2024.

This new allocation brought the bank’s net position to a high of $572.1 million today, but more importantly, it gives investors a new sign of confidence in this stock's future upside potential. It seems these institutional buyers are not alone in this sudden realization.

Wall Street analysts now feel comfortable with forecasting up to $3.18 in EPS for Hess going into the final quarter of 2025, a significant boost of 63% from today’s reported $1.95 in EPS. That being said, investors should know that wherever EPS goes, so does the stock price, justifying the fundamental growth thesis as well as the recent institutional buying.

A Worthy Mention in The Oil Race

Now, these industry giants are some of the obvious choices in any bullish take for energy. However, other areas of the sector are worth taking a second look into, such as the ones tasked with providing the necessary machinery and equipment for these giants to be able to source their oil in the first place.

That is where drilling equipment maker and leaser Transocean Ltd. NYSE: RIG becomes a reasonable target to consider. Being a smaller company, Transocean provides investors with an asymmetrical bet, as downside potential is severely limited while the upside promise is multiples larger.

Now that this stock has fallen to a new 52-week low, the risk-to-reward profile definitely agrees with this asymmetric nature today, especially as Wall Street analysts see a consensus price target of up to $4.6 per share, calling for as much as 98.5% upside from where the company has fallen to today.