NEW YORK — ExxonMobil (XOM) returned 48 percent over the past year, outperforming the S&P 500. Shares trade at $153.04, a valuation that is hard to justify against its energy sector peers.
ExxonMobil trades at 25.4 times earnings — a steep premium to Chevron (CVX) at 17.8 times and Occidental Petroleum (OXY) at just 7.7 times.
That premium is not supported by recent financials. ExxonMobil's revenue fell 4.1 percent over the last 12 months, while Chevron's grew 11.2 percent in the same period.
Profitability also lags. ExxonMobil's operating margin stands at 9.0 percent, below Chevron's 12.4 percent and well below Occidental's 27 percent.
Management attributes the premium to operational scale and execution on large-scale projects, citing record production in Guyana and the Beaumont refinery expansion. The Beaumont project recovered its initial investment ahead of schedule and added roughly 200,000 barrels a day of throughput in a single month compared with February.
A longer-term risk emerged from recent conflict in the Middle East. Two liquefied natural gas trains in Qatar, part of a joint venture with QatarEnergy, sustained damage. Management said the incident will affect about 3 percent of ExxonMobil's global production and that repairs will take three to five years. The episode exposes concentration risk in ExxonMobil's portfolio that investors should not dismiss.
ExxonMobil's valuation case rests almost entirely on its operational strength in the Americas offsetting the Qatar drag and its weaker financial metrics relative to peers. Execution on its core growth projects is what holds this thesis together — and it has not yet delivered the numbers to close the gap.
Investors seeking diversified oil and gas exposure may prefer an exchange-traded fund such as XOP over taking on the single-stock risk now concentrated in ExxonMobil's Qatar operations.
