Exxon Mobil vs. ConocoPhillips: Which Oil & Gas Stock is the better buy?

BlogAugust 20, 2021

Udemy.com – Top Online Cryptocurrency Courses from $9.99 Get now!

The U.S. Energy Information Administration (EIA) expects oil prices to remain stable through year’s end, backed by increasing demand as economic activities continue to rise. Therefore, we think oil-producing companies Exxon Mobil (XOM) and ConocoPhillips (COP) should continue benefiting. But which of these stocks is a better buy now? Keep reading to find out.

[vcex_button url=”https://cutt.ly/etoro-usi-signup” title=”Visit Site” style=”flat” align=”center” color=”green” size=”small” target=”self” rel=”none”]REGISTER SECURITIES INVESTMENT ACCOUNT HERE[/vcex_button]

Despite the rapid spread of the COVID-19 Delta variant that is threatening the global economic recovery, the EIA expects the global consumption of petroleum and liquid fuels to average 97.60 million b/d for all of 2021. This reflects a 5.30 million b/d increase from 2020. The EIA also expects Brent prices to remain near current levels for the remainder of 2021, averaging $72/b from August through November. Thus, the stable demand conditions should allow XOM and COP to maintain their financial strength in the coming months.

COP has gained 12.3% in price over the past six months, while XOM has returned 4.6%. Also, COP’s 33.9% gains year-to-date compare with XOM’s 32% returns. In terms of nine-month’s performance, XOM is the clear winner with 46.2% gains versus COP’s 36.6%.

But which stock is a better buy now? Let’s find out.

Latest Developments

On July 26, XOM, together with SABIC, announced that their joint venture, Gulf Coast Growth Ventures, which is located near Corpus Christi, Texas, had reached mechanical completion of a monoethylene glycol unit and two polyethylene units. The company expects the project startup to begin in the fourth quarter of 2021. This should promote XOM’s growth in the near term.

On July 13, COP declared a $0.43 per share quarterly dividend, payable to stockholders of record at the close of business on July 26, 2021.

Recent Financial Results

COP’s total revenues increased 154.3% year-over-year to $10.21 billion in its fiscal second quarter, ended June 30. Its net income attributable to the company grew 704.2% from its year-ago value to $2.09 billion. The company’s EPS increased 545.8% year-over-year to $1.55. Also, its cash and cash equivalents rose 118.1% year-over-year to $6.96 billion in the six months ended June 30.

XOM’s revenues increased 107.8% year-over-year to $67.74 billion in its fiscal second quarter, ended June 30. Its earnings increased 534.3% year-over-year to $4.69 billion. The company’s EPS improved 523.1% year-over-year to $1.10, and its cash flow from operating activities stood at $9.65 billion.

Past and Expected Financial Performance

XOM’s revenue has grown at a 0.9% CAGR over the past five years, while its tangible book value declined at a 5.4% CAGR over the past three years. Analysts expect XOM’s revenue to increase 62.2% in the current quarter, 72% in the next quarter, and 51.7% in the current year. The company’s EPS is expected to grow 11% in the next year.

In comparison, COP’s revenues have grown at a 4.2% CAGR over the past five years, while its tangible book value grew at a 12.6% CAGR over the past three years. Analysts expect the company’s revenue to increase 136.8% in the current quarter, 73.6% in the next quarter, and 120.2% in the current year. The company’s EPS is expected to grow 6.3% in the next year.

Profitability

COP is more profitable, with a 43.81% gross profit margin and a 35.06% EBITDA margin compared to XOM’s 31.56% and 11.33%, respectively.

Furthermore, COP’s ROE, ROA, and ROTC of 4.89%, 2.40%, and 3.21%, respectively, compare with XOM’s ROE of negative 7.79%, and ROA and ROTC of 1.13% and 1.64%, respectively.

Thus, COP is more profitable here.

Valuation

In terms of forward EV/Sales, COP is currently trading at 1.94x, which is 43.8% higher than XOM’s 1.09x. However, XOM’s 6.21 forward EV/EBITDA ratio is 30.9% higher than COP’s 4.29.

The Winner

Oil prices are expected to remain stable in the coming months due to strong international demand. This will allow oil-producing companies to continue operating despite COVID-19 concerns to be renewed. Along with the above analysis, we believe that the higher profit margin of COP compared to XOM will help COP be appreciated.
The article is based on personal opinion. All investment decisions are on your side. In addition, you need to constantly update information related to businesses, combine fundamental analysis and technical analysis to make the best decisions. Good luck!

[vcex_button url=”https://cutt.ly/etoro-usi-signup” title=”Visit Site” style=”flat” align=”center” color=”green” size=”small” target=”self” rel=”none”]REGISTER SECURITIES INVESTMENT ACCOUNT HERE[/vcex_button]

By investing.com

guest
0 Comments
Inline Feedbacks
View all comments