ExxonMobil (XOM) Expects Its Low-Carbon Business to Surpass Oil
Exxon Mobil Corporation XOM believes that its low-carbon business has the potential to generate handsome earnings and outperform its traditional hydrocarbon business in a decade.
The company plans to spend $7 billion through 2027 in its Low Carbon Solutions business unit to help others lower emissions.
ExxonMobil focuses on carbon capture and storage, hydrogen, and biofuels, which are crucial to decarbonizing hard-to-abate sectors accounting for the majority of energy-related carbon dioxide emissions.
Global emission markets have the potential to expand rapidly and reach a considerable proportion. This provides significant opportunities for ExxonMobil’s Low Carbon Solution business.
ExxonMobil’s latest investment is about 40% of its overall $17 billion allocated to low-emission initiatives through 2027. The rest will be allocated to further reduce emissions from XOM’s operations.
ExxonMobil is one of the most hydrocarbon-focused companies among Western oil producers. Unlike its peers, the company has stayed away from renewable energy and relied on reducing emissions from its operations.
Due to the growing urgency from investors and environmentalists to curb climate change, creating a more reliable roadmap to energy transition is necessary to address climate priorities and energy security challenges for a secure and sustainable energy future.
ExxonMobil predicts a future less exposed to commodity price fluctuations through predictable, long-term contracts with customers attempting to reduce their carbon footprints. The company expects to sign contracts that should generate multi-billion dollars in revenue per year in the next five years under current conditions.
Price Performance
Shares of ExxonMobil have outperformed the industry in the past six months. The stock has gained 15.8% compared with the industry’s 13.4% growth.
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Zacks Rank & Key Picks
ExxonMobil currently carries a Zack Rank #3 (Hold).
Investors interested in the energy sector might look at the following companies that presently buy a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cactus, Inc. WHD reported fourth-quarter adjusted earnings of 57 cents per share, beating the Zacks Consensus Estimate of 51 cents. Strong quarterly earnings were primarily driven by increased drilling activity by customers, offset partially by higher total expenses.
At the fourth-quarter end, Cactus had cash and cash equivalents of $344.5 million, which can provide it with immense financial flexibility. Cactus had no bank debt outstanding as of Dec 31, 2022.
Marathon Petroleum Corporation’s MPC adjusted earnings per share of $6.65 comfortably beat the Zacks Consensus Estimate of $5.54. The bottom line was favorably impacted by the stronger-than-expected performance of its key Refining & Marketing segment.
In the fourth quarter, MPC repurchased $1.8 billion of shares and another $700 million worth of shares from the start of this year till Jan 27. Marathon Petroleum, which gave an additional $5 billion share repurchase approval, currently has a remaining authorization of $7.6 billion.
Phillips 66 PSX reported fourth-quarter 2022 adjusted earnings of $4 per share, missing the Zacks Consensus Estimate of $4.34. Lower-than-expected quarterly earnings were driven by a decline in contributions from the Chemicals segment. The negatives were partially offset by strong refining margins worldwide.
Phillips 66 received approval from the board of directors to hike its dividend. The new quarterly dividend of $1.05 per share reflects an increase of 8.2% from the previous quarter’s 97 cents and a 14% hike from the year-ago quarter’s 92 cents.
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