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Why ExxonMobil Can Weather Market Uncertainty Better Than Peers

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Key Takeaways

  • ExxonMobil's debt-to-capitalization of 12.6% is well below the industry average of 28.1%.
  • A strong balance sheet allows XOM to fund projects, pay dividends and pursue acquisitions.
  • Shares rose 4.6% in the past year, while XOM trades at a higher EV/EBITDA than the industry.

Exxon Mobil Corporation (XOM - Free Report) generates the majority of its earnings from upstream operations and, therefore, is highly vulnerable tovolatility in oil and natural gas prices. However, unlike many energy companies, XOM can rely on its strong balance sheet to sail through the period of business uncertainty.

XOM has a debt-to-capitalization of 12.6%, significantly lower than 28.1% for the composite stocks belonging to the industry. Thus, the integrated energy giant has significantly lower exposure to debt capital than many of its peers. The strong balance sheet helps ExxonMobil to maintain operations, fund capital projects and pay dividends even when the pricing environment of commodities turns unfavorable. 

On top of that, XOM’s borrowing costs will likely be low owing to its strong creditworthiness. Also, during business uncertainty, when many firms will be forced to divest their operations, XOM will be able to pursue acquisitions on favorable terms, owing to its financial strength.

CVX & COP Also Have Strong Balance Sheets

Like XOM, Chevron Corporation (CVX - Free Report) and ConocoPhillips (COP - Free Report) also have considerably lower debt exposure. Thus, both CVX and COP, despite having huge vulnerability to oil and gas price volatility, can support their operations during uncertain times.

While CVX has a debt-to-capitalization of 16.7%, COP has 26.4% of debt to capitalization.

XOM’s Price Performance, Valuation & Estimates

Shares of ExxonMobil have inched up 4.6% over the past year compared with the 9.1% improvement of the composite stocks belonging to the industry.

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From a valuation standpoint, XOM trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 7.20X. This is above the broader industry average of 4.34X.

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The Zacks Consensus Estimate for XOM’s 2025 earnings has seen upward earnings estimate revisions over the past seven days.

Zacks Investment Research Image Source: Zacks Investment Research

ExxonMobil stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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