Exxon Mobil discussion in my books
I have discussed the company Exxon Mobil (ticker: XOM), relative industry or topics, in my latest two books; including:
In my book “The Rules of Super Growth Stocks Investing“:
- Section 4-4, p. 297, discussion of commodity
In my book “The Rules of 10 Baggers“:
- Sections 3-7, pp. 166-167, discussion on the energy industry
- Sections 6-7, page 323
Company profile
ExxonMobil, with operations around the world, especially in the eastern and southern United States, remains the “dominant” in the oil industry today.
The former market capitalization king
Before Apple (ticker: AAPL) ascended to the market capitalization throne of the US stock market in 2008, Exxon Mobil has always been the market capitalization king of the US stock market, which I mentioned in the previous article “How difficult to be out of the ordinary“. Exxon Mobil, the most valuable U.S. company 10 years ago (please note: the world’s largest market capitalization king at the time was the U.S.-listed PetroChina, ticker: PTR), is re-entering the top 10 after ranking 38th at the end of 2020 . Exxon Mobil now ranks 11th with a market cap of $424 billion, according to the S&P Dow Jones Indices.
Performance and Valuation
Business performance
| Year 2021 | Exxon Mobil | PetroChina |
| Annual revenue and growth rate (million) | 278,981 +55.18% | 411,384.6 +38.87% |
| Annual gross income and growth rate (million) | 90,045 +59.11% | 132,860.7 +30.22% |
| Annual operating income and growth rate (million) | 26,780 +1818.86% | 25,996.5 +3907.3% |
| Annual net income and growth rate (million) | 23,040 +2026.74% | 18,048.2 +2518.44% |
| Gross margin | 32.28% | 32.3% |
| Operating margin | 9.6% | 6.32% |
| Net margin | 8.26% | 4.39% |
Stock valuation
| 6/10/2022 | Exxon Mobil | PetroChina |
| Market capitalization ($ billion) | 414.878 | 141.573 |
| Share price | 95.81 | 53.92 |
| P/E | 16.99 | 6.42 |
| Dividend yield | 3.56% | 6.37% |
| Stock performance in past 5 years (S&P 500 was＋65.13%) | +20.33% | -15.21% |
Oil is a typical commodity
There is no difference between buying oil from Russia or from Saudi Arabia, buying from ExxonMobil and buying from China’s PetroChina, the only determining factor is the price ─ ─ anything that meet this requirement is commodities.
In the 4-4 subsections of my book “The Rules of Super Growth Stocks Investing”, I spent a lot of time mentioning commodity and the tips that must be paid attention to when investing in commodity. Investors should pay special attention to those tips.
Huge capital expenditure
The energy giant plans to spend between $20 billion and $25 billion a year from 2023 to 2027, and spend $21 billion to $24 billion this year on capital expenditures — one of the highest in the global energy industry. To its credit, Exxon has maintained adequate capital expenditures in a difficult 2020 and is now beginning to benefit from the success of new explorations such as the huge offshore field in Guyana, where it was heavily invested at the time.
Comparison of earning power
Gasoline prices in the U.S. hit a record $5 a gallon, and inflation is over 8%. Exxon is expected to generate about $41 billion in net income in 2022, up from $23 billion last year, this year only due to high oil prices and an oil embargo in Russia.
How does Exxon Mobil compare to the tech giants in terms of profits? Apple is by far the champion. It is expected to earn $100 billion this year, followed by Alphabet (tickers: GOOG and GOOGL) with $73 billion, Microsoft (ticker: MSFT) with $70 billion and JPMorgan (ticker: JPM) with $60 billion.
Risks of investing in Exxon Mobil
Uncertain energy prices
Investors in Exxon Mobil seem to forget that the company lost money in 2020, when energy prices were at historic lows and the stock was a third of what it is today. Everyone forgets that the company is losing money in 2020, and yes, the biggest company selling oil will lose money too.
Will be replaced by green energy
Another risk is that global green energy is in power, and it is an irreversible trend, which is unfavorable in the long run for companies operating in the petrochemical industry, no matter how profitable they are or how large the company is.
Just like the companies selling cigarettes 30 or 40 years ago are almost all the most profitable listed companies in each country, including Altria (ticker: MO) which was once a component of Dow Jones Index. However, after decades of social evolution, the rise of people’s health awareness, and the repeated tightening of laws and regulations in various countries, tobacco companies around the world are still making money, but they are not good targets for long-term investment. It is the consensus of almost all investors.
New sources of revenue are being explored
Extraction of Lithium Metal
Shareholders’ concerns that the company will be replaced by green energy are affecting the long-term trend of the company’s stock price. Of course, ExxonMobil will not sit still.
In May 2023, the company announced its investment in the lithium industry, betting on the vigorous development of electric vehicles and opening up a larger source of revenue for itself.
And in June 2023, ExxonMobil and TETRA(ticker: TTI) reached an agreement with TETRA to jointly develop lithium business. Direct Lithium Extraction (DLE) is being pursued to filter metals from Arkansas brines, but the technology is largely unproven on a commercial scale and is still in its very early stages.
In addition, ExxonMobil has also conducted multiple negotiations with International Battery Metals (International Battery Metals, ticker: IBATF) and energy mining companies on licensing DLE technology to accelerate technology acquisition.
Carbon capture
In July 2023, oil major ExxonMobil agreed to buy CO2 pipeline operator Denbury for $4.9 billion.
Related articles
- “How does Exxon Mobil make money? the former market capitalization king“
- “How does Occidental Petroleum, which Buffett is heavily betting on, make money? Will become the world’s largest carbon capturer“
- “Carbon capture current developments, prospects, and related companies“
- “How does Renewable Energy Giant NextEra Energy make money?“
- “Should investors chase the ESG?“
Disclaimer
- The content of this site is the author’s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.
- I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers’ direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.
