How Will Exxon Mobil Perform In 2018?

by Trefis Team
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We forecast Exxon Mobil (NYSE:XOM) to post modest revenue growth and adjusted EPS of $4.66 in 2018. We expect the growth to be primarily led by its Crude Oil & Natural Gas Liquid segment. 2017 was a good year for oil companies, as growth in WTI crude prices aided their margins. Similarly, in 2018, the average WTI crude oil price is expected to be $56, representing a 10% jump from the 2017 average. Accordingly, we expect Exxon Mobil should do well in 2018. However, the company’s capex guidance of $24 billion, which is on a higher side, could keep the earnings growth in check.

We have created an interactive dashboard on Exxon Mobil’s expected performance for 2018. You can adjust the revenue and margin drivers to see the impact on the company’s performance. Below we discuss our expectations and forecasts for the company.

Expect Crude Oil, NGL, And Other Upstream Business To Drive Growth In 2018

We estimate the crude oil, natural gas liquid, and other liquids revenues to grow roughly 10% in 2018. While we don’t expect much change in the production, the average crude oil and NGL sale price is estimated to see a 10% jump to $54. Our forecast is based on the fact that OPEC and its allies have committed to production cuts, which is likely to keep oil prices higher, as compared to the prior year. Having said that, there is a risk of OPEC changing its course, given a surge in oil export from the U.S. to Asia. Moreover, increased supply from the U.S. shale producers can keep the price in check. Beyond crude, we don’t expect any significant change in the company’s chemical as well as downstream revenues. 

Low Single-Digit Forecast Earnings Growth

 

 

Exxon Mobil’s Net Income Margin has been around 6% on average over the past few years, and we expect it to be more or less around that level in 2018 as well. Given our low-single-digit revenue growth forecast, we forecast around 1% growth in earnings in 2018. Also, the company has guided for higher capex in 2018 and beyond, which will keep the overall growth in check.

We estimate a price-earnings multiple of around 19 for Exxon Mobil, which is below many oil industry multiples, reflecting the risk of volatility in oil prices impacting the company’s future growth. This translates into a price estimate of $87 for Exxon Mobil’s stock, which is more than 15% above the current market price.

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