I doubled down on Exxon Mobil (XOM) yet again last week since I believe the oil and natural gas company has considerable earnings and free cash flow upside on the back of rising energy prices. Rising tensions in the Middle East and supply cuts proposed by OPEC point to higher energy prices over the short haul. Exxon Mobil is by far the free cash flow strongest energy company in the industry, and retains large production upside tied to its growing operations base in the Permian. I consider Exxon Mobil’s downside risk to be limited, relative to its peers, and XOM has the strongest dividend in the sector.
I am comfortable doubling down on Exxon Mobil once again. The energy company makes as solid a value proposition as ever: Exxon Mobil has been very profitable and competitive on both a free cash flow basis and a return on capital employed basis in the last five and ten years. The recent uptick in energy prices is encouraging and points to earnings surprise potential going forward. The Permian play provides production upside, and the market environment (Middle East tensions, OECD supply cuts) point to rising energy prices over the short haul. Exxon Mobil is still quite sensibly valued. Strong Buy for income and capital appreciation.
Source: Seeking Alpha
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