Exxon was added to our Best Stocks list last week. Its fundamentals are bottoming at the right time

Exxon Mobil (XOM) is demonstrating strong operational improvements and strategic growth, positioning it for a potential breakout above long-term resistance despite a decline in recent net income due to lower oil prices. The company reported record Q3 upstream production of 4.8 million barrels per day, returned $9.4 billion to shareholders, and achieved $14 billion in cumulative structural cost savings since 2019. Future growth is anticipated from 10 key projects completing in 2025, expected to add $3 billion in earnings, and the Golden Pass LNG export terminal commencing operations by year-end 2025, which are projected to form a foundation for 2030 earnings and cash flow, suggesting strengthening fundamentals and potential for an extended rally.

Analysis

Exxon Mobil (XOM) is demonstrating robust operational improvements and strategic growth initiatives, positioning it for a potential long-term breakout despite recent earnings stabilization. The company reported record third-quarter upstream production of 4.8 million barrels per day, including significant contributions from Permian and Guyana, alongside a commitment to shareholder returns with $9.4 billion distributed and a 4% Q4 dividend increase to $1.03 per share.

While Q3 net income of $7.8 billion contributed to a year-to-date total of $22.3 billion, down from $26.1 billion year-over-year due to lower commodity prices, XOM has achieved $14 billion in cumulative structural cost savings since 2019, with $2.2 billion in 2025 year-to-date. This focus on efficiency is expected to enhance future earnings during commodity price upturns.

Future growth is underpinned by 10 key projects slated for 2025 completion, projected to add over $3 billion in earnings, and the Golden Pass LNG export terminal commencing operations by late 2025. These initiatives are expected to form a "foundation" for 2030 earnings and cash flow, indicating a shift towards more efficient capital deployment with reinvestment rates projected to decline to 35% by 2030.

Technically, XOM is trading around $118, approaching a significant overhead resistance at $125. A confirmed breakout above this level could trigger an extended rally after three years of consolidation, supported by strengthening fundamentals and a favorable dividend yield.

Key Decisions for Investors

• Investors should closely monitor XOM's price action for a confirmed breakout above the $125 resistance level, as this could signal the start of an extended rally.
• Evaluate the long-term implications of XOM's strategic growth projects, particularly the 2025 project completions and the Golden Pass LNG terminal, which are expected to drive significant earnings and cash flow by 2030.
• Consider XOM's consistent shareholder returns and ongoing cost-cutting initiatives as factors buffering potential downside and enhancing earnings resilience in varying commodity price environments.