Is Exxon Mobil Corp. (XOM) stock a buy? Read our comprehensive review to find out

Exxon Mobil Corp. (XOM) stock has lost a substantial value this year due to the Covid-19 pandemic, as travel ban in most of the world negatively affected the oil prices. The company has been struggling to turn around things in these difficult times. It has recently announced several measures to reduce losses such as cutting investment plans, withdrawing profit growth projection, and writing off assets.

The Irving, Texas-based oil produce now plans to spend $16 billion to $19 billion in 2021, followed by $20-25$ billion spendings on annual basis at least through the next few years. The revised spending plan is significantly down from its original investment strategy of $30 billion to $35 billion annually.

Moreover, Exxon also plans to write off up to $20 billion assets located across the U.S., Canada, and Argentina. Most of the write-offs will include natural gas assets that will no longer be a part of its development plan.

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The largest U.S. oil producer by volume is also in the process of reducing 15 percent of its global workforce, which translates to 14,000 job cuts.

The latest measures come in the wake of a consistent harsh operating environment for the oil industry. Exxon CEO Darren Woods believes the company can improve earnings by focusing on core growth areas and leaving the underperforming segments.

Exxon also postponed its projection for a two-fold increase in profit by 2025. It now expects to achieve double profitability by 2027.

Quarterly financial highlights

Exxon has reported three consecutive quarters of losses this year amid weak demand that has been hurting the overall profitability.

In the most recent quarterly report, the company posted an adjusted loss of 18 cents per share, narrower than a loss of 25 cents per share forecasted by analysts. Comparatively, it had reported earnings of 75 cents per share in the same period of 2019.

Revenue came in at $46.2 billion, down from $65.05 billion last year. Analysts on average were expecting Exxon to generate revenue of $46.01 billion.

The company’s third-quarter performance was better than the prior quarter, for which it reported an adjusted loss of 70 cents per share on revenue of $32.61 billion.

If we look at the performance of key segments, the exploration and production segment reported a loss of $383 million for the quarter, as compared to earnings of $2.2 billion in the year-ago quarter. Its refining segment also lost $231 million in the quarter, versus a profit of $1.2 billion in the same period of 2019. The refining operations were mainly hurt by reduced margins and weaker conditions as a result of a travel ban imposed around the world due to the pandemic.

Exxon’s production output in the third quarter fell 5.8 percent to 3.67 million barrels of oil equivalent per day (BOE/D), as the company had to cut production due to weak prices.

On the bright side, the chemicals segment reported a profit of $661 million for the quarter, significantly higher than $241 million in the same period last year. Improved demand for packaging products and recovering construction markets contributed to the growth of the segment.

Analysts coverage

The consensus price target for Exxon stock is $44 per share, up more than 5 percent from the stock closing price of $41.68 on Friday. The high price target estimate for the stock is $74 per share, while the low estimate is $30 per share. When it comes to recommendations, most analysts have a “Hold” rating for the stock.

Bottom line

Exxon stock has lost more than 40 percent of its value so far this year, as the global economy continues to suffer from the pandemic. The company has been forced to make serious choices due to consistent weak prices for its products. However, the recently revealed measures, such as prioritization of assets, will likely help it in significantly trimming capital costs.

Exxon has the ability to recover its losses in a short period if oil prices rebound in the coming months. Multiple Covid-19 vaccines will get regulatory approval this month. Oil prices are expected to go up as businesses open once the vaccine is made widely available. Being the biggest oil company in terms of volume, Exxon is well poised to capitalize on any increase in oil prices.