Soaring oil stocks leave tech stocks in the dust

Jhe S&P 500 (SPX) is trading in the red as index heavyweights including Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), Amazon (NASDAQ: AMZN), alphabetical (NASDAQ: GOOGLE), and Tesla (NASDAQ: TSLA) have lost more than 20% of their value this year.

While big tech disappointed and dragged the benchmark lower, energy companies, brimming with cash amid rising commodity prices, supported the S&P 500 index and boosted shareholder returns thanks share buybacks and the payment of dividends.

For context, Exxon Mobil (NYSE: XOM) the stock has gained more than 53% this year and significantly outperformed the benchmark. Thanks to rising crude prices, this energy giant posted adjusted earnings of $8.8 billion in the last quarter, which improved year-over-year and on a sequential.

It is worth mentioning that even with the $3.4 billion charge due to its exit from Russia, XOM’s profits amounted to $5.5 billion and more than doubled from the previous year.

Additionally, Exxon generated $14.8 billion in cash flow from operations, which comfortably covered its capital expenditures and distribution to shareholders.

Thanks to the strength of the underlying business, XOM reinforced its share buyback plan. It now plans to buy back shares worth $30 billion through 2023.

Rising oil prices, the absence of weather-related challenges and improving volumes indicate that Exxon could deliver strong financial results in the coming quarters. However, Exxon’s stock forecast and price target on TipRanks indicate that the positives are already being priced into the stock.

XOM stock received 10 buy recommendations and 11 hold recommendations for a moderate buy consensus rating. Meanwhile, XOM stock has a Smart Neutral score of 7 out of 10. Its average price target of $94.53 represents a 2.9% upside from current levels.

Now what?

While XOM stock shows a neutral smart score, ConocoPhillips (NYSE: COP) is another energy stock with positive indicators from analysts, hedge funds and retail investors.

Notably, ConocoPhillips stock received 12 buy recommendations and two hold recommendations for a consensus strong buy rating. Additionally, their average price target of $128.69 indicates upside potential of 22.5% over the next 12 months.

According to TipRanks’ hedge fund trading activity tool, Bridgewater Associates, Ray Dalio’s LP increased its stake in COP shares in the last quarter. In addition, two funds opened a new position. Additionally, TipRanks investors are bullish on COP stocks, and 7.5% of those investors increased their stake in a month.

Overall, COP actions have a maximum smart score of 10 out of 10.

Conclusion

ConocoPhillips is well positioned to take advantage of rising crude prices. Its recent acquisition of Shell’s (NYSE: SHEL) Permian assets would strengthen its underlying activity. In addition, COP has taken an additional stake in Australia Pacific LNG (APLNG) which would allow it to seize energy transition opportunities and diversify its product mix.

Along with upgrades to its portfolio, its focus on strengthening its balance sheet, accelerating debt reduction and disposing of non-core assets bode well for growth.

During the last quarter, COP returned $2.3 billion to its shareholders in the form of ordinary dividends and VROC (variable return on cash) and share buybacks. Given its solid fundamentals and the continued strength of the sector, the company could continue to increase value for its shareholders.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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Felix J. Dixon