Exxon Mobil Is Overheated After Slew of Positive Developments

Oil prices can be pretty unpredictable, impacting energy stocks

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Oct 09, 2022
  • The markets have been in trouble since the start of the year. 
  • They have been struggling to recover from a sudden increase in interest rates and inflation.
  • However, Exxon Mobil is a rare strong performer this year because of elevated oil prices.
  • The stock is up more than 50% this year, making it a tad expensive in a bear market.
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Many stocks are taking a hit this year, but Exxon Mobil Corp. (

XOM, Financial) is among those bucking the trend. Shares of the oil major are up by double digits this year. Oil prices are rising on the back of supply limitations and other geopolitical conflicts, benefitting energy companies.

It is important not to forget that Exxon Mobil is a dividend aristocrat, which means it has been increasing its dividend for at least 25 years straight. This says something about the confidence of the company and its dependability in meeting investors' needs. The company's ability to maintain its dividend despite tough conditions is a testament to its strength and resilience.

However, the stock has been on a tear recently. Shares are up even as the broader markets are in retreat. At the time of writing, the average market price-earnings ratio for the oil and gas sector is 8.91 versus Exxon Mobil's ratio of 11.

Ultimately, deciding to invest in Exxon Mobil will depend on what kind of investor you are. For an income investor, this is a dream stock. Despite tough conditions, the company has maintained its dividend for many years. Since the stock has increased a lot over the last year, value investors, on the other hand, will want to limit their exposure at this point due to the potential lack of any further upside.

State of the oil industry

Oil and gas can be a volatile industry, where huge amounts of money are quickly made and lost. Many people struggle to find reliable information, making it hard to make the right investment choices. Some investors avoid volatile industries altogether, while others believe the potential rewards outweigh the risks.

Prices can swing wildly from month to month and even day to day. This volatility can create opportunities for investors willing to take on some risk. Nevertheless, the stocks are susceptible to losses if the price of oil changes. This is why investors should be careful when deciding whether or not to invest in the energy sector. Volatile industries can be high-risk, but they can also offer high rewards. Choose wisely before making any investment decisions.

Oil prices have been unsteady this year due to Russia's invasion of Ukraine, supply constraints from OPEC and other geopolitical factors. Th price increase has been felt by consumers around the world as fuel costs have risen sharply. This situation is unlikely to change anytime soon as tensions remain high. This price increase has caused hardship for many people, making transportation and heating more expensive. However, it has also been a boon for oil and gas companies as their revenues have soared.

According to Morgan Stanley (

MS, Financial), oil prices are forecasted to rise to $100 a barrel next quarter. This is not good for consumers as the falling cost of oil over the past several months has been a relief. But for Exxon Mobil, this is just the kind of news it needs before the end of the year.

Exxon is facing criticism

Exxon has come under a lot of scrutiny recently. Some have criticized it for price gouging, while others say the company neglects environmental responsibility.

President Joe Biden blamed the recent spike in gas prices on oil companies and used $500 million to fund clean energy projects across America. He also released some of America's strategic fuel reserves, adding supply to the market. Biden also mentioned Exxon during his visit to Los Angeles in June, specifically noting that its profits this year have reached a level of success paralleled by few others.

In addition, Exxon, one of the world's top 10 oil companies, has pledged to reduce emissions to zero by 2050. The company expects to accomplish this goal by enhancing operations and adopting new technologies. However, the commitment did not include emissions from consumers using oil and other fossil fuels. Instead, the focus is on the company's operations.

Ultimately, due to climate change activists' persistence, Exxon is unlikely to get off the hook.

The company is gearing up for a great quarterly report

In light of the positive tailwinds powering oil prices, Exxon Mobil will continue to do well. The company also shared this sentiment when issuing its earnings outlook in July.

According to the report, the company is closing in on quarterly profits close to its second quarter's record of $17.9 billion. However, Exxon Mobil predicts it will not make as much profit as oil prices have fallen in recent months. It is expecting a short-term dip before getting back on track.

Exxon Mobil forecasted that operating profits for the third quarter could reach $11 billion. This would be a big increase from $6.7 billion last year, but still down from the prior quarter. However, foreign exchange was excluded from the estimate.

The company's natural gas segment is doing well thanks to increasing prices in August. Exxon is expecting an increase in the price of natural gas, which will lead to a $1.8 billion to $2.2 billion boost in third-quarter earnings.

The report triggered another surge in the stock.

Exxon Mobil is scheduled to release its third-quarter earnings on Oct. 28.


Exxon Mobil is considered by many to be a safe and reputable company. It has a long history of success and regularly dishes out a healthy dividend. Moreover, the company is repurchasing its own stock, which should help drive up the price in the coming years.

However, Exxon Mobil also carries a certain amount of risk. Oil prices are notoriously volatile, so the company's share price tends to rise and fall along with it. To avoid investment risks, investors need to know how other oil and gas stocks are doing. Ultimately, deciding to invest in Exxon Mobil will depend on what kind of investor you are and what your goals are for your portfolio.


I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure
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