Thursday, February 2, 2023
HomeMarketExxon Stock Is Up. Oil Is Down. Something’s Gotta Give.

Exxon Stock Is Up. Oil Is Down. Something’s Gotta Give.


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It could be time to sell
Exxon
Mobil (XOM), given a disconnect between the stock and the oil markets.

The shares of the No. 1 U.S. energy company are up 86% this year to $113, while oil prices, as measured by West Texas Intermediate, have round-tripped to $77 a barrel after declining from a June high of more than $120.

Exxon doesn’t look expensive at 10 times projected 2023 profits of $11.50 a share. But there could be a risk to 2023 earnings if oil holds around current levels. Exxon earned about $2 a share in the first quarter—an $8-a-share annual run rate—when crude averaged $90 a barrel. Exxon and the entire U.S. energy patch could be vulnerable to a selloff.

Among the big oils,
Shell
(SHEL) looks like the best play, its stock having lagged behind Exxon’s by more than 50 percentage points this year. At $57, Shell trades for five times projected 2023 earnings and yields 4% (based on an anticipated dividend boost), against 3.2% for Exxon. Shell’s European domicile hurts due to a hostile operating climate for Big Oil, but the discount to Exxon seems too steep.

Write to Andrew Bary at andrew.bary@barrons.com

Credit: marketwatch.com

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