So you say you want to invest in top-10 oil stock ExxonMobil (XOM +0.31%) -- but you'd first like some assurance that the stock will go up after you buy it, and not down? Then today may be your lucky day! ExxonMobil's management just launched a forecast that lays out in clear, concise numbers how it expects its business to perform both next year and over the next five years.
Wall Street analysts have also chimed in about Exxon's forecast. Put these two prognostications together, and you should get a good inkling of where Exxon stock will be in five years.
NYSE: XOM
Key Data Points
Where ExxonMobil stock is today
ExxonMobil reported third-quarter earnings last month, and the news wasn't half bad. Despite generally falling oil prices, Exxon managed to hold its revenue decline to less than 1 percentage point. Earnings did take a hit, down 15% year over year. But that didn't prevent Exxon from rewarding its shareholders with a rising dividend, and Exxon now pays a 3.7% dividend yield that is more than twice the average yield on the S&P 500.
Free cash flow (FCF) was a robust $11.3 billion, significantly ahead of reported net income in the quarter. For the year to date, Exxon has generated $26.4 billion in positive free cash flow -- about 97% of reported net income.
What Exxon expects to do between now and 2030
Exxon characterized its Q3 results as "industry leading," and the company intends to continue making investments in the new year to maintain that lead, even as it continues investing in its own stock to reward shareholders.
In 2025, Exxon plans to ramp up capital investment to somewhere between $27 billion and $29 billion, even as it spends $20 billion more on share repurchases -- concentrating profits for its shareholders among fewer shares outstanding.
Over the next five years, the company furthermore promised to invest between $28 billion and $33 billion in annual capex. Management didn't say for certain how long it will keep buying back shares, but did commit to spending another $20 billion on share buybacks in at least 2026.
Maintaining this pace of investing both in its business and in its shareholders through 2030, Exxon predicts, will result in earnings $20 billion better than what it earned in 2024, and $30 billion more operating cash flow. And while Exxon's 2024 numbers aren't fully in just yet, based on analyst forecasts, that should work out to approximately $54.5 billion in fiscal 2030 earnings (58% total growth) and $87.4 billion in fiscal 2030 operating cash flow.
Even assuming Exxon is still investing about $33 billion in capex that year, it would mean Exxon's 2030 free cash flow will be $54.4 billion -- essentially backing up every $1 of net income with $1 in real cash profit.
Image source: Getty Images.
What analysts think Exxon will earn in 2030
Speaking of analyst estimates, though, what does Wall Street think of these numbers? Well, here's where things get interesting: Turns out, if Exxon comes anywhere close to delivering what it's promising, Wall Street analysts are going to be utterly gobsmacked.
Reviewing long-term forecasts from S&P Global Market Intelligence, it seems analysts are currently calculating Exxon will earn just $42.2 billion in 2030, and predict free cash flow of not $54.4 billion -- but only $38.7 billion.
Long story short, Exxon is promising to beat Wall Street earnings estimates by 29% in 2030, and deliver 40% more free cash flow to boot!
Is ExxonMobil stock a buy?
So what does all this mean for investors?
Priced under 14 times earnings, paying a dividend yield near 4%, and expected to grow earnings at about 4.5% annually over the next decade, Exxon stock looks a little pricey right now. And with free cash flow currently lagging net income a bit, the stock's price-to-free-cash-flow ratio looks even less attractive.
Exxon, however, is now promising to blow past these analyst estimates, grow its earnings at a steady 10% annual rate over the next five to six years, grow its cash flow at 8%, and cut enough costs to close the gap between reported earnings and actual free cash flow.
Assuming Exxon can deliver on its promises, today's valuation of roughly 14 times both earnings and FCF looks right on the money to me, for a stock growing at 10% and paying a nearly 4% dividend. If all goes as planned, I'd expect the company's stock price to therefore continue growing as its earnings and free cash flow expand.
Five years from now, Exxon stock should be worth a lot more than it costs today.
