Many investors might consider Oil-Energy sector as an attractive investment opportunity, thanks to the massive recovery in oil prices. From hitting the historic low mark of below $30 per barrel in early 2016, the price of Brent crude recovered more than 183%.
Exxon Mobil Corporation XOM stock looks appealing primarily because of impressive crude prices. However, investors must note that the company’s fortunes are not solely reliant on the price of the commodity. In fact, ExxonMobil’s strong integrated business model, with diversified business presence, has made it a relatively lower-risk energy sector player.
Notably, ExxonMobil’s upstream portfolio did not record much production growth in recent years and the trend is not expected to change for at least another year. Nevertheless, the company owns some of the most prolific upstream assets globally, with a number of major projects coming online over the next few years.
Hence, due to its extensive geographical footprint, ExxonMobil is less exposed to regional challenges — including current pipeline bottleneck problems in the Permian Basin, where the company has substantial operations.
Other aspects, which make ExxonMobil an attractive pick, are its refining operation that is the largest in the world, substantial chemical assets, dividend history and credit profile that are second to none in the space.
Moreover, the abundance of natural gas in the United States from growth of shale fracking continues to bolster ExxonMobil’s chemical business since its petrochemical crackers benefit from cheaper natural gas feedstocks like ethane instead of naphtha (which derives from crude oil).
All those developments are reflected in the company’s Zacks Rank #2 (Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or #2, offer the best investment opportunities for investors. Thus, ExxonMobil appears to be a lucrative investment proposition at the moment.
Other Stocks to Consider
Other top-ranked players in the energy sector are Shell Midstream Partners LP SHLX, Petroleo Brasileiro S.A. or Petrobras PBR and Chevron Corporation CVX, each flaunting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shell Midstream Partners recorded an average positive earnings surprise of 7.9% for the last four quarters.
Petrobras’ bottom line beat the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 10.4%.
Chevron will likely post earnings growth of 122.9% and 19.4%, in 2018 and 2019, respectively.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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Shell Midstream Partners, L.P. (SHLX) : Free Stock Analysis Report
Petroleo Brasileiro S.A.- Petrobras (PBR) : Free Stock Analysis Report
Chevron Corporation (CVX) : Free Stock Analysis Report
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
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