ExxonMobil (XOM +1.37%) and Chevron (CVX +1.51%) are leaders in the oil patch. They both have globally integrated operations, low costs, fortress balance sheets, and excellent records of delivering value to shareholders. The energy giants also boast strong long-term growth outlooks.
Given their similarly strong profiles, it can be difficult to decide which of these top energy stocks to buy. Here’s a look at which one is the better buy right now.
Image source: The Motley Fool.
The undisputed leader in the oil patch
ExxonMobil and Chevron share many similarities. However, when comparing these two large international oil companies (IOCs), it’s abundantly clear that Exxon reigns supreme. Last year, the oil giant generated $28.8 billion in earnings and $52 billion in cash flow from operations, putting it well ahead of Chevron ($13.5 billion of earnings and $33.9 billion in cash flow from operations). Exxon not only bested its closest peer last year but has also delivered IOC-leading earnings and cash flow growth over the last five years (compound annual growth rates of more than 20% and 10%, respectively).
Those aren’t the only categories where Exxon leads all IOCs. As of the end of last year, Exxon had delivered $15.1 billion in cumulative structural cost savings since 2019, more than all other IOCs combined. It has also delivered an average return on capital employed of 11% since 2019, leading all IOC. Meanwhile, Exxon ended last year with an industry-leading balance sheet, backed by an ultra-low 11% net debt-to-capital ratio. Exxon’s financial strength enabled it to pay $17.2 billion in dividends last year, making it the second-largest dividend payer in the S&P 500. Exxon has also increased its dividend for an industry-leading 43 straight years. As a result, Exxon has delivered peer-leading total shareholder returns since 2019.
Today’s Change
(1.37%) $2.20
Current Price
$162.69
Key Data Points
Market Cap
$674B
Day’s Range
$159.67 – $163.31
52wk Range
$101.19 – $176.41
Volume
749
Avg Vol
21M
Gross Margin
20.92%
Dividend Yield
2.51%
While Exxon leads in most categories, that’s not to say Chevron is an also-ran. It has delivered the highest dividend growth rate in its peer group over the past decade. Chevron also has the lowest breakeven level in its peer group (less than $50 a barrel to fund its capital program and dividend), the best cash margins, the lowest reinvestment rate, and the highest new project returns.
What’s ahead for these energy giants
Exxon and Chevron are both operating under five-year plans. Exxon raised its 2030 plan last December. The oil giant now expects to deliver $25 billion in earnings growth and $35 billion in cash flow growth by 2030 at the same prices and margins as 2024. That implies 13% annual earnings-per-share growth and double-digit cash flow growth, both of which will be even higher on a per-share basis due to its share repurchase program. Exxon also expects to deliver $145 billion in cumulative free cash flow through 2030 at $65 oil, supporting continued dividend growth (current yield over 2.5%) and share repurchases. The company expects a combination of high-return capital projects and an additional $5 billion in structural cost savings to support its plan.
Chevron has a similar strategy of investing in high-return capital projects and delivering structural cost savings. This approach positions it to deliver more than 10% annual adjusted earnings per share and free cash flow growth through 2030. That should give Chevron the fuel to continue increasing its dividend (current yield of more than 3.5%) while repurchasing $10 billion to $20 billion of shares each year. That’s enough to retire about 3% to 6% of its outstanding shares annually.
Today’s Change
(1.51%) $2.94
Current Price
$197.28
Key Data Points
Market Cap
$393B
Day’s Range
$193.48 – $198.86
52wk Range
$133.77 – $214.71
Volume
108
Avg Vol
12M
Gross Margin
15.15%
Dividend Yield
4.41%
Meanwhile, both companies expect to continue growing beyond 2030. In addition to investing in oil and gas, both are growing their lower-carbon energy platforms. Exxon expects its new businesses (Proxxima systems, carbon materials, carbon capture, hydrogen, lithium, and others) to potentially reach $13 billion in earnings by 2040, with a long growth runway beyond that. Meanwhile, Chevron is investing in biofuels, natural gas-fired power plants for AI, hydrogen, lithium, and carbon capture. These businesses have the potential to be meaningful future growth drivers.
Chevron is great, but Exxon is even better
I think Chevron is a great oil stock to buy, especially if you’re seeking dividend income. It offers a higher current yield and could continue to grow its payout faster than Exxon in the future. However, if you’re seeking to buy the best oil stock in the world, that’s ExxonMobil. It’s the undisputed industry leader in earnings, returns, cost-savings, and balance sheet strength. Meanwhile, it has the fuel to deliver robust growth through 2030 and beyond, which could enable it to continue delivering leading total returns over the long term.