Exxon Mobil reports moderately positive 1Q financials

Ticker: XOM

Author: Stock Analyst  Date: 2021/04/30

Exxon Mobil posted a moderately positive 1Q2021 report. Adjusted earnings per share rose 22.6% YoY to $0.65. Revenue rose 5.3% YoY to $59.2bn. Both parameters were 7-9% above consensus.

Among the positive factors in the first quarter, the management notes an increase in oil prices, a gradual recovery in the margins of oil refining and petrochemicals and optimization of operating expenses. The results were negatively affected by a 6.4% reduction in hydrocarbon production and abnormal cold weather in February, the impact of which is estimated at $ 600 million.

Exxon Mobil increased its operating cash flow by 47.6% on the back of revenue and profit growth. This, together with a sharp decrease in capex, made it possible to reduce net debt by $ 3.4 billion over the quarter. At the same time, debt still remains at a higher level than a year ago, which is associated with an increase in borrowing in a difficult 2020.

In general, the reporting can be assessed as quite successful. Due to a reduction in production, an incomplete recovery of the oil products market and one-time factors associated with abnormal cold weather, the financial results, of course, are still lower than in 2019 - before the pandemic. However, optimization of operating and capital costs is already showing its effectiveness, allowing to generate positive cash flow, which is enough to pay dividends and reduce debt.

We currently rate Exxon Mobil Buy with a target price of $ 63.8, which equates to an 8.8% upside. Including dividends, the upside is 14.7%.