In the oil-energy space, Exxon Mobil Corporation XOM and Eni SpA E are two leading integrated energy companies. Eni has posted a solid year-to-date return of 23.4%, outperforming XOM’s 8.6% gain. However, stock price performance alone does not provide a complete picture of a company’s investment potential.
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A thorough evaluation of business fundamentals, strategic direction, operational performance and shareholder returns is essential to determine which company offers a stronger long-term investment case. Let’s explore these key aspects in detail.
XOM’s Cost Discipline Trumps Eni’s Structural Struggles
ExxonMobil plans to kick-start 10 large energy projects, spanning across oil, gas, chemicals and low-carbon solutions this year. The large integrated energy player has estimated that the projects will add more than $3 billion in earnings by 2026, significantly enhancing its bottom line. The developments reflect XOM’s strong focus on generating money for the long term while investing in high-quality projects.
XOM also has an aim to lower its break-even costs to $30 per barrel by the end of this decade. Thus, the energy major will be able to generate profit even if there is a crash in crude prices, thereby making its upstream operations resilient.
Eni is also planning to start five major energy projects this year, which will likely generate more profits in 2026. Hence, it is growing but not as fast as ExxonMobil. Moreover, some part of Eni’s overall business is not doing well, like Versalis, its chemicals division. The underperformance is owing to high costs and weak demand, especially in Europe.
XOM’s Stronger Financials & Better Shareholder Returns
ExxonMobil has significantly lower exposure to debt capital compared to Eni and other composite players belonging to the industry. XOM’s total debt to capitalization of 12.2% is considerably lower than the industry’s 28.3%. Eni’s total debt to capitalization of 34.1% is higher than both XOM and the industry. Thus, ExxonMobil is better positioned to lean on its balance sheet during an uncertain business environment.
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Also, XOM is rewarding shareholders with significantly more money because it is earning more and has a stronger cash flow. In the March quarter alone, XOM returned $9.1 billion to its shareholders, which included $4.8 billion in share repurchases. Eni, on the other hand, returned a much smaller amount, only €386 million, as share repurchases in the same period.
Is XOM a Better Stock Than E?
Considering the backdrop, it has been clear that when XOM is expanding aggressively, Eni is planning to restructure Versalis, while closing facilities, such as steam crackers in Brindisi and Priolo. Also, XOM is rewarding shareholders handsomely. Given the positive developments for XOM, investors are willing to pay a premium for the stock, which is reflected in the valuation snapshot.
XOM is currently trading at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 7.10x. This represents a premium compared with the broader industry average of 4.29x and Eni’s 4.36x.
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However, although XOM’s long-term outlook looks bright, investors shouldn’t rush to bet on XOM right away, as there are uncertainties surrounding the energy business environment, following the recent move by the United States to join Israel in striking nuclear facilities of Iran. However, those who have already invested in the stock should retain it. The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Eni’s outlook, however, is not encouraging, and hence investors can sell the stock. In fact, over the past 60 days, Eni, which carries a Zacks Rank #4 (Sell), has witnessed downward earnings estimate revisions for 2025 and 2026, as reflected in the snapshot below.
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Eni SpA (E) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
