ExxonMobil Corporation (XOM Quick QuoteXOM - Free Report) recently announced its expectations for fourth-quarter 2025 earnings. While the integrated energy giant anticipates crude price weakness to weigh on its upstream earnings for the quarter, lower feedstock costs, stemming from softer oil prices, are expected to have benefited its refining margins.

So, what should investors do with the stock? Should they bet on XOM now or stay on the sidelines? To conclude, it is prudent to first evaluate the company’s underlying business fundamentals.

XOM Expects Oil Price Softness to Hurt Q4 Upstream Earnings

In its latest 8-K SEC filings, XOM stated that it is likely to see a sequential decline in the December quarter upstream earnings by $800 million to $1.2 billion, due to a decrease in liquid prices.

To have an idea of how oil prices behaved in the December quarter, let's analyze the commodity prices from the data provided by the U.S. Energy Information Administration (“EIA”). The average Cushing, OK WTI spot prices for October, November and December of this year were $60.89 per barrel, $60.06 per barrel and $57.97 per barrel, respectively, per EIA data. In the prior quarter, commodity prices were $68.39 per barrel, $64.86 per barrel and $63.96 per barrel, respectively, in July, August and September, according to the EIA. Investors should note that the weakness in the crude pricing environment is also likely to have hurt the upstream businesses of other integrated giants like BP plc (BP Quick QuoteBP - Free Report) and Chevron Corporation (CVX Quick QuoteCVX - Free Report) .

Coming to the natural gas story, XOM projects a change in gas price to either sequentially increase its upstream earnings by $100 million or decrease the earnings by $300 million.

Soft crude pricing environment in the fourth quarter of 2025 is likely to have aided its refining business. ExxonMobil expects its December quarter earnings from its Energy Products business unit to increase by $300 million to $700 million sequentially.

Advantageous Upstream Assets to Back XOM’s Long-Term Outlook

Although the softness in crude prices is likely to have hurt XOM’s upstream business in the fourth quarter, the integrated energy giant’s long-term outlook seems favorable. This is because XOM has a strong footprint in the Permian, the most prolific oil and gas play in the United States, and offshore Guyana. In the Permian, the integrated giant has been employing lightweight proppant technology and hence has been capable of boosting its well recoveries by up to as much as 20%.

In Guyana, XOM has made several oil and gas discoveries, further highlighting its solid production outlook. Notably, record production from both resources has been aiding its top and bottom lines. Importantly, in both resources, the breakeven costs are low, thereby aiding XOM in continuing its upstream business even during a low crude pricing environment.

In its recent corporate plan update, ExxonMobil projects its total production from upstream operations to increase to 5.5 million oil equivalent barrels per day by the end of this decade. The energy behemoth added that its advantageous assets, which include the Permian, Guyana and LNG, will be responsible for 65% of the total volumes.  

Resilient Refining & Conservative Capex Boost XOM’s Outlook

XOM’s resilient refining operations give support when oil prices turn low and the upstream business suffers. The company highlighted on its third-quarter earnings call that low-value fuel is getting upgraded in its Singapore Resid Upgrade to high-value end products, thereby meeting the growing demand for cleaner fuels.

The energy giant also has a conservative capital spending strategy while maintaining strong productivity. Notably, the integrated major expects its earnings and cash flows to improve without increasing its capital spending, which is a strong positive.

Importantly, by the end of this decade, XOM expects its return on capital employed (ROCE) to exceed 17%. The company also has a strong focus on returning capital to shareholders, as reflected by the fact that in the S&P 500, it is the second-largest payer of dividends. XOM has hiked dividends consecutively for more than four decades and has an aggressive share buyback program.

What Investors Should Do With the Stock?

XOM’s favorable long-term outlook is reflected in the price chart. Over the past year, ExxonMobil has jumped 14.9%, outpacing the 14.1% growth of the industry’s composite stocks, and 14.6% and 8.1% improvements of BP and CVX, respectively.

One-Year Price Chart

Image Source: Zacks Investment Research

The price chart also reflects investors’ optimism for ExxonMobil’s strong balance sheet. XOM’s debt-to-capitalization of 13.6% is way lower than the industry’s 28.7%, highlighting the fact that XOM has significantly lower exposure to debt capital.

Image Source: Zacks Investment Research

Following the outperformance in price, XOM looks expensive now. This is reflected in the fact that the stock is trading at a trailing 12-month EV/EBITDA of 7.69x—well above the broader industry average of 4.89x, and BP’s3.08x. In comparison, CVX is valued even more richly, with an EV/EBITDA multiple of 8.11x.

Image Source: Zacks Investment Research

Thus, although weak crude prices are likely to have hurt upstream operations and XOM is currently overvalued, investors shouldn’t rush to bet on the stock right away, despite the long-term outlook appearing bright. However, those who have already invested can retain XOM, which currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.