Exxon’s Energy Evolution: Exploring the Next Five Years in the Oil and Renewables Landscape

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Exxon (NYSE:XOM) is one of the world’s largest energy companies. A diversified business, it has upstream operations, downstream operations, and renewable energy operations. Over the last five years, Exxon stock has risen from around $78 to $104. The question is – where will it be in another five years?

What will Exxon stock be in 5 years?

Forecasting future stock prices for companies in the oil industry is notoriously difficult. That’s because revenues and earnings in this industry tend to fluctuate a lot, depending on oil prices. So, we need to make a lot of assumptions about the price of oil in the future.

Currently, oil prices are quite high, with WTI crude oil trading near $80 per barrel. And many analysts expect prices to remain high in the medium term due to the fact that major oil companies like Exxon and Chevron are not engaging in significant drilling activity. There’s no guarantee that prices will remain high over the next five years, however. If we were to see a major economic slowdown in the years ahead, oil prices may decline.

Five year forecast

Let’s say that oil prices did remain at current levels over the next five years though. And let’s also say that Chevron was able to increase its earnings per share by 7% per year over this period through a combination of strategic investments (it is expanding its operations in high-return areas like the Permian Basin and Guyana), cost savings, and share buybacks.

In this scenario, earnings per share would rise to around $13.34 by FY2029. If we apply today’s price-to-earnings (P/E) ratio of 12 to this earnings forecast, we get a stock price of $160.

Now, this scenario could be too optimistic. As I noted earlier, the price of oil could fall over the next five years. If it did, Exxon would most likely struggle to generate that level of earnings growth and its share price would probably not reach $160. However, if oil prices were to remain at current levels, I think this kind of growth could be achievable.

Is Exxon Mobil undervalued?    

Is Exxon Mobil stock undervalued today? I don’t think so, personally. As I mentioned earlier, the stock currently has a P/E ratio of about 12. That multiple is significantly lower than the market average. But it strikes me as about right for an oil company. Ultimately, oil is an industry that is facing major long-term structural challenges due to the increasing focus on sustainability. And companies in the industry are going to have their work cut out to continue growing. So, I think a P/E ratio of 12 is appropriate for the company.

Will Exxon raise its dividend in 2024?

Turning to the dividend, Exxon has increased its payout in recent years. And at present, most analysts expect the company to raise its dividend again in 2024. Last year, the oil giant paid out a total of $3.68 per share in dividends to investors. This year, however, analysts expect a payout of $3.99 per share. That would represent an increase of 8.4%, which is a decent level of dividend growth.

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