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Here's Why Hold Strategy is Apt for ExxonMobil (XOM) Stock Now

ExxonMobil's (XOM) growth story is centered around its presence in Permian and Guyana resources.

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This story originally appeared on Zacks

Exxon Mobil Corporation XOM has witnessed upward earnings estimate revisions for 2021 and 2022 in the past seven days. This integrated energy company, carrying a Zacks Rank #3 (Hold), has gained 50.8% year to date compared to the 41.1% increase of the composite stocks belonging to the industry.  

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Zacks Investment ResearchImage Source: Zacks Investment Research

Factors Favoring the Stock

ExxonMobil is among the largest integrated energy players in the world, having a strong presence in upstream and downstream operations. The company’s growth story is centered around its presence in Permian and Guyana resources. Both the assets have brightened the company’s upstream business prospects, considering the low cost of production.

ExxonMobil recently raised its estimate of discovered recoverable resources from the Stabroek Block. The block is located off the coast of Guyana. The energy giant has bumped up the estimate to approximately 10 billion oil-equivalent barrels. The company has included a new discovery at the Cataback-1 well in its updated resource estimate. Thus, the integrated energy player said the total key discoveries in the prolific offshore resource are now at more than 20.

Another positive development that is pleasing investors is its recently expressed optimism over the significantly higher oil and gas prices contributing to its third-quarter 2021 upstream earnings. The integrated energy giant is expecting its upstream business to generate a maximum of $1.5 billion more earnings in the third quarter, sequentially. The company also projects a significant sequential improvement in its downstream business – a key operating unit.

Risks

The last time the company hiked payout was in 2019, when it raised its second-quarter dividend. Interestingly, despite no dividend hike last year, the company’s annual dividend of $3.48 per share for 2020 was higher than $3.43 in 2019. Thus, the company has preserved its 38-year streak of dividend increases. However, if ExxonMobil decides not to raise its fourth-quarter 2021 dividend payout, the company will no longer be a dividend aristocrat.

ExxonMobil's above-average capital spending program has got investors concerned. This is reflected in the company’s stock price underperformance compared to the broader energy sector over the past five years.

Stocks to Consider

Meanwhile, a few better-ranked players in the energy space include Whiting Petroleum Corporation WLL, Comstock Resources, Inc. CRK and Range Resources Corporation RRC. All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Whiting Petroleum has witnessed upward earnings estimate revisions for 2021 in the past 30 days.

Comstock is expected to witness earnings growth of 378.3% in 2021.

Range Resources has seen upward earnings estimate revisions for 2021 in the past 30 days.



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Exxon Mobil Corporation (XOM): Free Stock Analysis Report

 

Comstock Resources, Inc. (CRK): Free Stock Analysis Report

 

Range Resources Corporation (RRC): Free Stock Analysis Report

 

Whiting Petroleum Corporation (WLL): Free Stock Analysis Report

 

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