XOM's Integrated Business Model Shields Earnings Amid Lower Oil Prices

Exxon Mobil Corporation XOM, the integrated energy giant, has recently warned that its upstream earnings are expected to have been weighed down sequentially due to lower liquids prices. According to data from the U.S. Energy Information Administration, the West Texas Intermediate spot average is expected to drop from $65.78 per barrel in the third quarter to an estimated $59.31 per barrel in the fourth quarter.

However, the integrated nature of the company allows it to capitalize on the softness in crude prices through its refining operations. Lower crude prices imply cheaper feedstock for XOM’s refineries, which supports refining gains. This acts as a cushion to sustain the company’s profitability when its upstream business is affected by lower liquids prices. In fact, XOM has forecasted that changes in industry margins are expected to have a positive impact of $300-$700 million on the Energy Products segment and up to $200 million on the Specialty Products segment on a sequential basis.

The integrated business model shields ExxonMobil’s earnings by supporting downstream profitability and partially offsetting the negative impact on its upstream earnings. XOM’s diversification should help it stabilize earnings during a volatile commodity price environment. 

CVX and BP: Two Leading Integrated Energy Majors

Chevron Corporation CVX and BP plc BP are two other global integrated energy firms.  The two companies are involved in both the upstream and downstream segments of the oil and gas business. This allows them to stabilize earnings and sustain profitability even in challenging commodity pricing environments.

XOM’s Price Performance, Valuation & Estimates

Shares of ExxonMobil have risen 15.4% over the past year compared with the 9.2% increase of the composite stocks belonging to the industry.

From a valuation standpoint, XOM trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 7.97X. This is above the broader industry average of 4.91X.

The Zacks Consensus Estimate for XOM’s 2025 earnings has seen upward revisions over the past 30 days.

XOM, CVX and BP each currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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