The Israel-Hamas war has escalated the tensions in the Middle East and further boosted the recent rally in oil prices. The extension of production cuts by OPEC+, stable demand despite macroeconomic challenges, and optimism about higher demand in China due to the country’s stimulus measures have driven crude oil prices higher over recent days. Amid a favorable backdrop, we used TipRanks’ Stock Comparison Tool to place Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX), EOG Resources (NYSE:EOG) against each other to find the most attractive oil stock as per Wall Street experts.
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Exxon Mobil (NYSE:XOM)
Exxon Mobil recently provided an update about its third-quarter numbers, indicating a sequential growth in earnings due to higher energy prices and better margins from refining, partially offset by lower profitability in the Chemicals business. However, the company’s Q3 2023 earnings would still be lower compared to the prior-year quarter, as oil prices were at elevated levels last year due to the Russia-Ukraine war.
XOM is scheduled to announce its Q3 2023 results on October 27. Analysts expect adjusted EPS of $2.35 compared to $4.45 in the prior-year quarter and $1.94 in Q2 2023.
Looking ahead, Exxon expects to double its earnings and cash flow potential by 2027 compared to 2019. The company aims to improve its profitability by focusing on high-return, low-cost-of-supply assets in the Upstream and Product Solutions businesses. Further, Exxon projects annual capital expenditures of $20 to $25 billion through 2027. It aims to invest about $17 billion in lower-emission initiatives.
Is Exxon a Buy, Sell, or Hold?
Following the Q3 2023 update earlier this month, Goldman Sachs analyst Neil Mehta noted that the company’s implied EPS at the mid-point is estimated to be about $2.30, which was lower than his estimate of $2.61 and closer to the consensus estimate of $2.35.
Mehta remains “broadly constructive” on Exxon’s upstream portfolio, where he sees lucrative near and long-term production growth, fueled by the Permian and Guyana. However, he maintained a Hold rating on XOM with a price target of $116 due to the stock’s relative valuation following multi-year outperformance.
With nine Buys and seven Holds, Exxon stock earns Wall Street’s Moderate Buy consensus rating. The average price target of $126.88 implies 14.4% upside potential. Shares are essentially flat on a year-to-date basis. XOM’s dividend yield stands at 3.3%.
Chevron (NYSE:CVX)
After generating stellar growth in last year’s earnings, Chevron reported a decline in its adjusted EPS to $3.08 from $5.82 in the prior-year quarter. Nonetheless, the company exceeded analysts’ estimates.
Chevron is scheduled to announce its third-quarter results on October 27. Analysts expect the company’s adjusted EPS to decline to $3.46 compared to $5.56 in the prior-year quarter. However, the estimate indicates an increase compared to adjusted EPS of $3.08 in Q2 2023, driven by higher energy prices in the third quarter.
The company is confident about navigating a volatile environment, backed by a strong balance sheet. It is positive about maintaining its dividend and capital program even at a $50 per barrel Brent level.
What is the Target Price for CVX Stock?
Last month, Mizuho analyst Nitin Kumar raised his price target for Chevron stock to $215 from $209 and maintained a Buy rating on the stock. The analyst updated oil and gas estimates to reflect the rebound in commodity prices in Q3 2023.
Kumar thinks that the revival in commodity prices has fueled a share rebound, as investors focus on OPEC+ cuts, undersupply in global oil markets, and product inventory tightness.
Overall, Wall Street has a Moderate Buy consensus rating on Chevron stock based on eight buys and five Holds. The average price target of $191.54 implies about 15% upside. Shares have declined 7% so far this year. CVX offers a dividend yield of 3.6%.
EOG Resources (NYSE:EOG)
EOG Resources is one of the largest oil and gas exploration and production companies in the U.S. The company invests in high-return projects across its multi-basin portfolio, with a focus on adding lower-cost reserves to reduce its breakeven and expand margins.
Further, the company is committed to return a minimum of 60% of its annual free cash flow to shareholders. In the second quarter of 2023, the company generated $1.04 billion in free cash flow. It paid $480 million in dividends and repurchased $300 million worth of stock.
EOG is slated to announce its Q3 results on November 3. Analysts estimate adjusted EPS of $2.85, down from $3.71 in Q3 2022 but up from $2.49 in Q2 2023.
Is EOG a Good Stock to Buy?
On September 27, JPMorgan analyst Arun Jayaram raised his price target for EOG Resources to $156 from $145 and reiterated a Buy rating on the stock ahead of the fiscal Q3 earnings report. The analyst anticipates a free cash flow beat, a $1 special dividend, and a technical update on the Utica project.
Jayaram thinks that EOG will turn to special dividends following its “brief flirtation” with share buybacks. He also expects a “sizeable ramp” in its Q4 2023 oil production.
Including Jayaram, 14 analysts have a Buy rating on EOG Resources, while four have a Hold recommendation. The average price target of $149.80 implies about 18% upside potential. Shares have pulled back about 3% year-to-date. Considering only regular dividends, EOG stock offers a dividend yield of 2.6%.
Conclusion
Wall Street is highly bullish on EOG Resources but cautiously optimistic about Exxon Mobil and Chevron. Including dividends, the potential total return (dividends plus stock price appreciation) that EOG can offer is slightly more attractive than the other two stocks.
