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ExxonMobil (XOM) Up 14% MTD: What's Behind the Rally?

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Zacks Equity Research
·3 min read
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Shares of Exxon Mobil Corporation XOM have jumped 14% month to date (MTD) compared with the industry’s 8.5% growth. The Zacks Rank #1 (Strong Buy) stock has witnessed upward revisions in the Zacks Consensus Estimate for 2021 earnings in the past seven days.

Let’s delve into the factors behind the stock’s price appreciation. 

What’s Favoring the Stock?

The price of West Texas Intermediate (WTI) crude has crossed the $48-per-barrel mark to reach its maximum level since Feb 26. With the approval of coronavirus vaccines across countries, analysts are expecting global fuel demand to witness significant recovery in 2021. This, in turn, is brightening the crude oil pricing scenario. The robust crude price rebound is a boon for ExxonMobil’s upstream operations. Also, recovery in fuel demand will aid the integrated energy giant’s downstream operations.

ExxonMobil recently announced its priority to allocate near-term capital spending on key assets that will secure significant future value. The leading integrated energy firm is planning for $16 to $19 billion in capital and exploration investments in 2021. The company has also set a target for annual investments of $20 billion to $25 billion from 2022 to 2025. The prime assets on which the investments will be focused on comprise the most prolific Permian basin in the United States, offshore oil and gas resources in Brazil and Guyana, and several chemicals projects.

Hence, by strengthening its portfolio of asset base, the company expects to generate more returns for shareholders while enhancing balance sheet strength. Thus, ExxonMobil will be able to mitigate oil price volatility stronger than before and protect dividend payments.

Notably, the energy giant has a strong balance sheet with debt to capitalization of 20.3%, lower than 34.9% of the composite stocks belonging to the industry. Thus, the company can continue to lean on its balance sheet strength to sail through the coronavirus pandemic-dented energy business scenario.

Stock to Consider

Meanwhile, a few other top-ranked players in the energy space are Summit Midstream Partners, LP SMLP, DCP Midstream, LP DCP and HighPoint Resources Corporation HPR. While Summit Midstream carries a Zacks Rank #2 (Buy), DCP Midstream and HighPoint sport aZacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Summit Midstream has seen upward earnings estimate revisions for 2020 in the past seven days.

DCP Midstream has seen upward estimate revisions for 2020 earnings in the past 30 days.

HighPoint is likely to see earnings growth of 167.5% in 2020.

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Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
 
Summit Midstream Partners, LP (SMLP) : Free Stock Analysis Report
 
DCP Midstream Partners, LP (DCP) : Free Stock Analysis Report
 
HIGHPOINT RESOURCES CORP (HPR) : Free Stock Analysis Report
 
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Zacks Investment Research