In the energy space, both Chevron Corporation CVX and Exxon Mobil Corporation XOM are giants, with operations across upstream to downstream activities. Currently, CVX and XOM have a market capitalization of $293.4 billion and $417.6 billion, respectively.
Both CVX and XOM have strong balance sheets so they can withstand adverse business environments. While XOM has a total debt-to-capitalization of 16.7%, the metric for CVX is 12.6%. Compared to the 24.5% debt-to-capitalization of composite stocks belonging to the industry, both ExxonMobil and Chevron are better off.
ExxonMobil and Chevron have solid upstream businesses. In the Permian Basin – the most prolific oil and gas resource in the United States – and offshore Guyana, ExxonMobil has a solid pipeline of profitable projects. Chevron too has a strong foothold in the Permian, where a significant portion of the energy major’s acreage has minimum royalty payments. In Stabroek Block, located off the coast of Guyana, ExxonMobil has made many major discoveries that significantly improve its production outlook. The advantaged growth projects of Guyana have lower greenhouse gas intensity than most of the oil and gas-producing resources across the globe. Thus, in the upstream business front, it could be said that ExxonMobil is ahead of Chevron.
Looking at free cashflow analysis, ExxonMobil is again ahead of Chevron. In the first quarter, ExxonMobil’s free cashflow of more than $11 billion was significantly higher than CVX’s $4.2 billion. This came despite the considerably higher capital spending of ExxonMobil than Chevron. Also, looking at free cashflow yield, XOM’s 15.2% is higher than CVX’s 12.3%.
Although the analysis reveals that ExxonMobil is ahead of Chevron in few cases, there are also certain parameters where CVX is clearly a better stock. Meanwhile, given their massive scale and excellent financial position, both of these companies are capable of sailing through any uncertain business scenario. But taking everything in consideration, none of the stocks are appropriate picks now, as revealed by their Zacks Rank #3 (Hold). Therefore, it would be prudent for investors to wait for a better entry point as the timing is still not right to hit the Buy button. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.