That means it has little control over its top line. And while costs are within the company's control, the business is capital intensive by nature. So Exxon is always on a tightrope, trying to balance revenues and expenses.
When oil prices are extremely high that's an easy effort, but when they are low it requires a lot more finesse. This is a wild card that is hard to predict, since the recent pullback in capital investments throughout the energy sector could lead to higher prices down the line.
That would solve a host of ills here, allowing Exxon to pay down debt while still investing for the future and rewarding investors with big dividends.
Or, the move toward clean energy could reduce demand and keep prices range bound, which would mean Exxon needs to remain extra careful with its spending and potentially rely even more on its balance sheet for funding. The dividend in that scenario would become increasingly risky.
Exxon is generally considered a well-run oil company, though it is clearly out of step with the clean energy theme that is increasingly important on Wall Street.
While it is easy to heap scorn on the company after a disastrous year for the oil industry, Exxon isn't taking an outlandish position about the future -- just one that people don't like.
That said, there are very real risks here, given that it is spending more than it brings in from its business and increasingly relying on debt to fund capital spending and dividend payments.
With a hefty 6. That's a fair take, but the key is that you have to buy into the company's views on the long-term prospects of the oil industry. If you don't, Exxon is clearly not the right name for you today. Discounted offers are only available to new members.
Stock Advisor will renew at the then current list price. Average returns of all recommendations since inception. Cost basis and return based on previous market day close. Investing Best Accounts. Stock Market Basics. These changes directly impact ExxonMobil's earnings. In short, it is moving in the right direction. Yet ExxonMobil may not return to earnings growth at the levels it delivered during the shale boom. This is partly because oil demand growth is expected to decelerate. Even if higher commodity prices and stable demand allow the company to reduce its debt and sustain its dividend payments, its gains on the bottom line would likely be limited.
Moreover, the forecast conditions could put downward pressure on prices, and the influences of the Organization of the Petroleum Exporting Countries OPEC and its individual members may keep oil prices volatile. For all of these reasons, ExxonMobil stock could continue to underperform the broader market in the coming decade.
Investors should be able to find better dividend and growth opportunities elsewhere. Discounted offers are only available to new members. Stock Advisor will renew at the then current list price. Average returns of all recommendations since inception. Cost basis and return based on previous market day close. Investing Best Accounts. Stock Market Basics. Stock Market. Industries to Invest In. Inflation is at a year high. But these Mad Money megatrends could help you fight back.
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