Where will ExxonMobil be in five years?

So you say you want to invest in Top 10 oil reserves ExxonMobil (NYSE: XOM) – But first would you like to be sure that the shares will go up after you buy them and not go down? Then today could be your lucky day! ExxonMobil management just released 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 weighed in on Exxon’s forecast. Putting these two forecasts together, we should have a good idea of ​​where Exxon stock will be five years from now.

ExxonMobil reported third-quarter earnings last month and the news wasn’t that bad. Despite the widespread decline in oil prices, Exxon managed to keep its revenue decline to less than 1 percentage point. Profits took a hit, falling 15% year over year. But that didn’t stop Exxon from rewarding its shareholders with a growing dividend, and Exxon now pays a dividend yield of 3.7%, which is more than double the average market yield. S&P 500.

Free cash flow (FCF) hit a solid $11.3 billion, well above net income reported in the quarter. So far this year, Exxon has generated $26.4 billion in positive free cash flow, about 97% of reported net income.

Exxon characterized its third-quarter results as “industry-leading” and the company intends to continue making investments in the new year to maintain that lead, even as it continues to invest in its own stock to reward shareholders.

In 2025, Exxon plans to increase capital expenditure to between $27 billion and $29 billion, even as it spends $20 billion more on share buybacks, concentrating profits for its shareholders among fewer shares outstanding.

Over the next five years, the company also promised to invest between $28 billion and $33 billion in annual capital expenditures. Management did not say with certainty how long it will continue to buy back shares, but it pledged to spend another $20 billion on share buybacks at least in 2026.

Exxon predicts that maintaining this pace of investment in both its business and its shareholders through 2030 will result in profits $20 billion better than what it made in 2024, and $30 billion more in operating cash flow. And while Exxon’s 2024 numbers aren’t complete yet, according to analyst forecasts, that should equate to roughly $54.5 billion in fiscal 2030 earnings (58% total growth) and $87.4 billion in cash flow. operating cash flow for fiscal year 2030.

Even assuming Exxon continues to invest about $33 billion in capital expenditures that year, it would mean that Exxon’s free cash flow in 2030 will be $54.4 billion, essentially backing every dollar of net income with $1 of profit in real cash.

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However, speaking of analyst estimates, what does Wall Street think of these numbers? Well, here’s where things get interesting: It turns out that if Exxon comes close to delivering what it promises, Wall Street analysts will be completely stunned.

Review long-term forecasts S&P Global Market IntelligenceIt appears that analysts currently estimate that Exxon will earn only $42.2 billion in 2030, and predict free cash flow not of $54.4 billion, but only $38.7 billion.

Simply put, Exxon promises to beat Wall Street earnings estimates by 29% in 2030 and generate 40% more free cash flow to boot.

So what does all this mean for investors?

Priced at less than 14 times earnings, paying a dividend yield close to 4%, and earnings expected to grow about 4.5% annually over the next decade, Exxon stock looks a little expensive right now. And with free cash flow currently lagging a bit behind net income, the stock’s price-to-free cash flow ratio looks even less attractive.

Exxon, however, now promises to beat these analyst estimates, grow its profits at a constant 10% annual rate over the next five to six years, increase its cash flow by 8%, and cut enough costs to close the gap between reported income. earnings and real free cash flow.

Assuming Exxon can deliver on its promises, the current valuation of about 14 times both earnings and FCF seems about right to me, for a stock growing at 10% and paying a dividend of almost 4%. If all goes according to plan, I would expect the company’s share price to continue growing as its earnings and free cash flow increase.

Five years from now, Exxon stock should be worth much more than it is today.

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rich blacksmith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Where will ExxonMobil be in five years? was originally published by The Motley Fool