Oil prices are expected to remain volatile due to the ongoing geopolitical tensions in the Middle East, uncertainty around interest rate cuts, and the disruption caused by Houthi rebels in the Red Sea. Meanwhile, natural gas prices have plunged due to oversupply after a warmer-than-expected winter. Despite a tough backdrop, Wall Street is bullish about certain energy stocks based on their long-term growth prospects. Using TipRanks’ Stock Comparison Tool, we placed Exxon Mobil (NYSE:XOM), SLB (NYSE:SLB), and Chevron (NYSE:CVX) against each other to find the most attractive energy stock as per Wall Street analysts.
Exxon Mobil (NYSE:XOM)
After enjoying a huge spike in profits due to elevated oil and gas prices, Exxon Mobil’s bottom line is now under pressure as energy prices have normalized. XOM’s adjusted earnings per share (EPS) declined 27.2% year-over-year to $2.06 in Q1 2024 and missed analysts’ consensus estimate of $2.19.
The oil and gas giant’s performance was impacted by declining refining margins and the plunge in natural gas prices. These headwinds more than offset the increased volumes from Guyana, the Beaumont refinery expansion, and benefits from cost savings.
Exxon has generated cumulative cost savings of $10.1 billion compared to 2019 and plans to achieve cumulative savings of $15 billion by the end of 2027. Moreover, it continues to reward shareholders via dividends and share purchases (total shareholder distributions of $6.8 billion in Q1 2024), backed by solid cash flows. XOM stock offers a dividend yield of 3.34%.
Looking ahead, Exxon Mobil expects to complete the $59.5 billion acquisition of Pioneer Natural Resources in Q2 2024. The acquisition is expected to boost the company’s footprint in the Permian basin.
Is Exxon a Buy or Sell?
Despite the Q1 miss, TD Cowen analyst Jason Gabelman reiterated a Buy rating on Exxon stock and raised the price target to $135 from $128. The analyst believes that XOM’s underlying performance remains robust, as reflected in the company’s ability to organically fund its normalized buyback plan. The analyst expects Exxon to benefit from several large projects expected to come online in 2025.
With 11 Buys and six Holds, Wall Street has a Moderate Buy consensus rating on Exxon Mobil stock. The average XOM stock price target of $125.31 implies about 6% upside potential from current levels. Shares have advanced more than 18% year-to-date.
SLB (NYSE:SLB)
Oilfield services company SLB, formerly known as Schlumberger, recently reported Q1 earnings per share of $0.75, in line with the Street’s expectations. The bottom line grew 19% year-over-year, driven by the company’s international business.
SLB’s Q1 revenue increased 13% year-over-year to $8.7 billion, with international revenue growing 18% to $7.06 billion and offsetting the 6% fall in the revenue from the North America division to about $1.60 billion.
The company expects its Q2 performance to benefit from a seasonal rebound in the business in the Northern Hemisphere and robust activity in the international markets, mainly in the Middle East, Asia, and Africa.
SLB also stands to gain from its strategic acquisitions, including the recently announced ChampionX deal. It aims to return $7 billion to shareholders, including $3 billion this year and $4 billion in 2025. SLB expects oil and gas companies to boost their investments in production and reservoir recovery, thus driving demand for its services.
Is SLB a Buy, Sell, or Hold?
On Monday, Jefferies analyst Lloyd Byrne reiterated a Buy rating on SLB stock and increased his price target to $73 from $71 in reaction to the company’s Q1 results.
The analyst noted that the market continues to assess the impact of the company’s recent acquisitions and Saudi Arabia’s announcement to curb capital spending. Nevertheless, Byrne thinks that SLB’s focus on strengthening its core business and growing shareholder returns are “constructive steps.”
SLB scores a Strong Buy rating on TipRanks, backed by 15 Buys versus only one Hold recommendation. The average SLB stock price target of $66.94 implies nearly 41% upside potential. Shares have declined about 9% year-to-date. With a quarterly dividend of $0.28 per share, SLB offers a dividend yield of more than 2%.
Chevron (NYSE:CVX)
Like rival Exxon, Chevron’s Q1 2024 results were also hit by lower refining margins and a decline in natural gas prices. The company’s adjusted EPS fell 17.5% to $2.93 but managed to exceed analysts’ estimate of $2.92.
Further, the company’s U.S. net oil-equivalent production increased 35% year-over-year to 1.57 million barrels of oil equivalent per day in Q1 2024, driven by the PDC Energy acquisition and strong execution in the Permian and Denver-Julesburg basins.
Also, Chevron rewarded $6 billion to shareholders through dividends of $3 billion and share repurchases worth $3 billion in the first quarter. CVX offers a dividend yield of 3.73%.
Meanwhile, Chevron remains confident about completing its $53 billion pending acquisition of Hess Corp. this year, despite Exxon challenging the deal in arbitration court over its rights in a joint operating agreement for Guyana oil assets.
Is Chevron a Good Stock to Buy?
On Tuesday, HSBC analyst Kim Fustier reaffirmed a Buy rating on Chevron stock and increased the price target to $178 from $175. The analyst noted that the Hess acquisition is unlikely to close before late 2024, taking into account the arbitration proceedings. Nonetheless, Chevron’s Permian performance and progress on Tengiz expansion are expected to drive a solid organic growth outlook (excluding the Hess deal).
Wall Street has a Strong Buy consensus rating on Chevron based on 13 Buys versus three Holds. At $186.40, CVX stock has a 15.6% upside potential from current levels. The stock has risen 8% so far in 2023.
Conclusion
Wall Street is highly bullish on SLB and Chevron and cautiously optimistic about Exxon. Analysts see the pullback in SLB stock as a good opportunity to invest in the oilfield services company. They expect higher upside potential in SLB stock than XOM and CVX stocks, supported by the strength in demand for the company’s services in international markets.
