Exxon Mobil (XOM) was removed from the Dow Jones Industrial Average in August 2020 after 92 years. The stock has weakened as oil prices keep falling. Can XOM stock reclaim the throne of the energy industry? Or has the stock peaked for good? Will Exxon Mobil’s next quarterly earnings report turn things around?
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Exxon stock hit a 52-week low this week, but that didn’t deter analysts. TD Cowen upgraded the stock to outperform from market perform with a price target of 115 on Tuesday.
Meanwhile, UBS maintained its buy rating on the oil stock and trimmed its target price to 132 from 133.
Energy companies made up almost 5% of the S&P 500 as of August 2023. And Chevron (CVX) continues to battle Exxon Mobil for leadership of the energy industry, as do foreign oil giants such as Shell (SHEL) and BP (BP).
Crude Oil Prices Pull Down XOM Stock
Lower crude oil futures prices are pulling down energy stocks.
The average price of gas across the U.S. on Tuesday was $3.08 per gallon, which was down from $3.42 one year ago, according to AAA data. West Texas Intermediate (WTI) oil prices are off the September highs and are around $74 a barrel.
Natural gas prices soared after the Russia-Ukraine war erupted but have plunged and have yet to recover.
Exxon Stock: Fundamental Analysis
The company reported a miss on its Q3 earnings and sales expectations on Oct. 27. Third-quarter adjusted EPS fell 49% from the prior year to $2.27 per share, while sales dropped 19% to $90.8 billion. Lower chemical margins were a factor contributing to the drop.
The oil giant had been one of one of America’s most profitable companies. However, its 49% quarterly earnings drop in the third quarter followed a 53% drop in Q2, and three quarters of slowing growth prior to that.
At the same time, the 19% quarterly sales drop in Q3, followed declines of 4% and 28% in the prior two quarters, which were preceded by two quarters of diminishing growth.
Analysts expect full 2023 EPS to drop to $9.27 from a historic $14.06 per share profit in 2022, with a further decline to $9.05 in 2024, according to MarketSmith.
Exxon is expected to report its fourth-quarter results on Feb. 2.
XOM stock’s Composite Rating has deteriorated to a depressed 16. Its EPS Rating sank to a dismal 11, and partly reflects a loss in 2020, in addition to declining quarterly profits.
The stock holds an Accumulation/Distribution Rating of D-, indicating fairly heavy institutional selling over the last 13 weeks.
XOM Stock Technical Analysis
Exxon stock broke out of a cup-with-handle base in late Sept. 27, but the breakout immediately failed and the stock tanked. XOM fell below its 50-day moving average in October and remains below the down-trending line. Exxon’s relative strength line has also been on a steep downward path since the oil stock reversed. Shares are down about 19% from the 120.70 peak of nearly four months ago.
Exxon Mobil’s Relative Strength Rating has crumbled to a low 20, meaning it outperformed only 20% of stocks in the IBD database in the last 12 months.
Exxon is in the Oil & Gas-Integrated group. The group is No. 143 out of 197 IBD industry groups.
Exxon’s Stock Follows Oil Prices
As with other oil stocks, Exxon will rise and fall with crude oil prices. So even when Exxon looks good based on fundamentals and technicals, crude oil prices may suddenly plunge, taking XOM stock down, too.
Investors could choose to buy an energy exchange traded fund as a way to play sector moves while avoiding stock-specific risk. Energy Select Sector SPDR Fund (XLE) and the iShares U.S. Energy ETF (IYE) are two energy-related ETFs. But those ETFs are still exposed to crude oil price swings.
Exxon and Chevron are major weights in XLE.
Is Exxon’s XOM Stock A Buy?
The bottom line: XOM is below the 50- and 200-day lines and its relative strength line is trending sharply lower. The stock is not in a base, so XOM stock is not a buy.
Investors can check out IBD Stock Lists and other IBD content to find dozens of the best stocks while you wait for Exxon to turn around and build a proper base.
Follow Kimberley Koenig for more stock market news on X, the platform formerly known as Twitter, @IBD_KKoenig.
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