Exxon Mobil Corp. (NYSE:XOM) reported better-than-expected first-quarter earnings on April 30, extending the streak of earnings surprises to three quarters. The company benefited from higher oil prices and cost-cutting measures, reporting adjusted earnings per share of 65 cents, which was above the FactSet consensus estimate of 60 cents per share. Total costs declined as well, highlighting the company is on pace to achieve its cost reduction targets.
This strong financial performance failed to lift the stock higher as investor focus shifted to the company’s lack of effort to tackle climate change in comparison to other oil giants and the threat from activist investors who want four new independent directors on the board. Exxon Mobil shares, however, have appreciated 37% over the last 12 months thanks to the stellar recovery of oil prices.
There is significant uncertainty regarding the company’s business model and the competitive landscape remains challenging, but Exxon might be a very attractive investment for investors with above-average risk tolerance.
First-quarter earnings recap
Exxon reported revenue of $59.15 billion and net income of $2.73 billion for the first quarter of 2021. Production of oil equivalents increased to 3.8 million barrels per day because of lower government-mandated curtailments. The company generated $9.3 billion in cash flow from operations, aided by improved prices and margin expansion. An increase in seasonal gas demand in Europe and lower scheduled maintenance contributed to a 12% increase in gas volumes as well. Liquid production in the U.S was negatively impacted by winter storm Uri, resulting in a production decrease to 2.25 million barrels per day. In the first quarter, downstream earnings improved sharply compared to the previous year, which had a massive impact on earnings as Exxon is still a traditional oil giant with a lot of interest in downstream operations.