The Stock of Exxon Mobil Rises as Profit Beat Market Expectations, Offsetting a Large Revenue Shortfall

Exxon Mobil Corp. experienced a rise in its shares on Friday following the release of its fourth-quarter financial report. Despite a decrease in profit, the results surpassed expectations, overshadowing the disappointment of falling revenue.

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The oil and gas giant proudly announced that it distributed a remarkable $32.4 billion to its shareholders in 2023, positioning itself as a leader among its peers. This substantial amount included $14.9 billion through dividends and an additional $17.4 billion through stock repurchases.

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In response to these positive figures, the company's stock, XOM, saw a 0.7% increase.

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Jefferies analyst Lloyd Byrne described Exxon's results as "solid" in a note on Friday. He particularly highlighted the impressive performance in the production and energy products sectors. However, he anticipated potential criticism regarding the fourth quarter's capital expenditures, which slightly exceeded expectations at about $6.2 billion.

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The unexpected increase in capital expenditures was partially attributed to the "accelerated" spending on projects in Guyana, as noted by analysts at Piper Sandler. They expressed optimism about Exxon's future, especially with the anticipated addition of Pioneer Natural Resources' Permian position, following Exxon's all-stock bid for Pioneer in October, deemed a "home run" by Wall Street.

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On a separate note, Exxon revealed that its new Mobil Lithium business, launched in the fourth quarter, is set to commence lithium production in 2027. By 2030, the company aims to produce sufficient lithium to meet the demands of approximately 1 million electric vehicles annually.

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For the fourth quarter, net income witnessed a decline from $12.75 billion, or $3.09 per share, in the same period the previous year to $7.63 billion, or $1.91 per share. Excluding nonrecurring items such as a $2 billion impairment resulting from regulatory obstacles in California, the adjusted earnings per share amounted to $2.48, surpassing the FactSet consensus of $2.20.

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However, the overall revenue took a hit, dropping by 11.6% to $84.34 billion, falling significantly short of the consensus of $90.03 billion. This decline was attributed to stagnant upstream production and a 1.2% decrease in energy products sales.

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Adjusted earnings for the upstream business, covering exploration and production, experienced a notable 28% decrease to $6.3 billion, primarily due to the decline in natural gas prices. The drastic 43% fall in natural gas futures and a 10.7% decline in crude oil futures from the end of 2022 to the end of 2023 played a significant role in this downturn.

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Despite challenges, Exxon Mobil managed to maintain a free cash flow of $7.97 billion, marking a 35% drop but surpassing the consensus of $7.77 billion.

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Over the past three months, Exxon Mobil's stock has witnessed a 6.2% decrease, while the Energy Select Sector SPDR ETF has seen a 4.8% decline, and the S&P 500 has surged by 13.6% as of Thursday.

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