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Chevron vs. Exxon Mobil: Which Oil Titan Should Investors Focus On?

·4 min read

Energy has been a hot place to park cash in 2022. The Zacks Oils and Energy Sector is up more than 30% YTD, absolutely crushing the S&P 500’s performance.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Many companies, such as Chevron (CVX) and Exxon Mobil (XOM), come to mind when thinking of the realm.

Both carry operations within the exploration and production of oil and natural gas, refining and marketing petroleum products, manufacturing chemicals, and other energy-related businesses.

In addition, both companies carry a strong Zacks Rank #2 (Buy).

However, each company has its unique advantages, perhaps making it difficult to see which one is currently better positioned.

It raises a very valid question, which stock should investors pay closer attention to? Let’s take a closer look.

Key Difference

First, it’s imperative to know that while Chevron and Exxon Mobil have benefited significantly from the oil rally, CVX is affected more heavily by oil price fluctuations than XOM.

The extra exposure that CVX carries to oil prices can undoubtedly be seen as a double-edged sword; when oil prices fall, the negative impact is much more significant than it is on XOM. However, when oil prices rise, CVX benefits at a higher level.

The item that sets Exxon Mobil apart from Chevron is its refining – XOM is much more integrated in downstream operations.

Right off the bat, Exxon Mobil’s lower exposure to commodity price fluctuations provides it a valuable blend of defense.

Further, it's worth noting that XOM has a higher market cap than CVX.

Share Performance & Valuation

It’s no secret that both companies’ shares have enjoyed stellar price action YTD, crushing the general market. Still, XOM’s 64% gain easily surpasses CVX’s 42% return.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Pivoting to valuation, XOM carries a Style Score of an A for Value, with CVX having a B.

XOM shares are visibly cheaper, with its 0.9X forward price-to-sales ratio sitting well beneath Chevron’s 1.3X. Still, both companies’ forward P/S ratios sit nicely beneath their respective five-year medians.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

XOM beats out CVX in YTD share performance and currently has cheaper shares.

Cash Flow & Dividends

Cash is king, and everybody loves getting paid. Fortunately, both CVX and XOM have strong free cash flow paired with enticing dividend payouts.

In its latest quarter, XOM posted a quarterly free cash flow of a steep $17.4 billion, much higher than CVX’s also impressive quarterly free cash flow of $10.6 billion.

Investing in energy comes with many perks, and dividends are one of them. CVX and XOM reward their shareholders handsomely; the companies are part of the elite Dividend Aristocrat group.

Dividend Aristocrats have successfully upped their dividend payout in 25 consecutive years, making it clear to see why it’s such an elite group.

Still, one must come out on top, and it looks to be CVX – the company’s annual dividend yields a sizable 3.6%, just a hair below XOM’s 3.7% annual dividend yield.

However, CVX’s five-year annualized dividend growth rate of 6% is much higher than XOM’s 2.8%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Quarterly Performance

For the final comparison, we can look at how the oil titans have fared in their quarterly results.

XOM has been on a strong earnings trajectory, exceeding the Zacks Consensus EPS Estimate in eight of its previous ten releases.

Top-line results have also been strong, with Exxon Mobil registering six revenue beats over its last ten quarters.

Below is a chart illustrating the company’s EPS BNRI (before non-recurring items).

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

CVX’s earnings track record isn’t as strong – the company has exceeded bottom-line estimates in just five of its previous ten prints.

However, revenue results have been much more robust, with CVX exceeding top-line estimates in seven of its last ten releases.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Based on their recent quarterly reports, XOM has performed at a much higher level, consistently providing bottom-line beats.

Bottom Line

It’s tough to choose between these two titans. However, with the energy sector poised to reap unbelievable profits, both stocks would be an excellent choice for those looking for energy exposure.

Both companies carry substantial growth profiles, strong Zacks Ranks, and reward their shareholders handsomely.

Exxon Mobil XOM shares provide investors with a higher level of defense thanks to its favorable business mix, whereas Chevron CVX is more sensitive to fluctuations in commodity prices.

For these reasons, I believe that XOM is better suited for more conservative investors, whereas CVX is better suited for those with higher risk tolerance.


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