Daily Brief: Exxon And Chevron Are Making Big Tech Look Like Old News

Daily Brief: Exxon And Chevron Are Making Big Tech Look Like Old News

over 1 year ago3 mins

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Big Oil’s only getting bigger: Exxon Mobil and Chevron reported staggering results on Friday.

What does this mean?

Exxon and Chevron are the latest big energy firms to report piled-up profit this year. Exxon, for starters, boasted its strongest quarter in its 152-year history. The oil and gas behemoth’s earnings nearly tripled from the same time last year to hit a more-than-expected $20 billion, pumped up by extra production and bumper natural gas prices. Chevron’s results weren’t too shabby either: it almost doubled its profit to hit the $11-billion mark, just shy of the record earnings it made the quarter before. Investors celebrated by sending the two companies’ shares higher on Friday, meaning both stocks have now outperformed the wider market by over 70% this year.

Exxon Chevron stock

Why should I care?

The bigger picture: Mo money, mo problems.

Exxon’s shareholders will be seeing green, despite their tolerance for dirty fuel: the firm’s increasing its dividend by 3%, which – when layered on top of its $15 billion-a-year share buyback program – means shareholders should see an immense $30 billion cash back this year. But the US president might have something to say about that: he recently accused Exxon of making “more money than God”, and wants the firm (and its heavy-hitting rivals) to invest more in production, which should lower prices at the pump. He might have a point: Exxon’s long-term spending is locked just short of $23 billion a year, 30% below its pre-Covid levels.

Big Oil profit

For markets: Big Tech’s old news.

Big Tech will be watching Big Oil with envy: tech giants have held the S&P 500’s top spots for the past decade, but their worse-than-impressive earnings have shaken up the seating chart. Exxon, for one, has overtaken Meta’s market value and is back in the index’s top ten stocks for the first time since 2019. After all, Exxon’s predicted to make over $50 billion in profit this year, more than Amazon and Meta combined.

Exxon vs SP 500

Keep reading for our next story...

Volkswagen’s Bugging

VW image

Volkswagen (VW) reported worse-than-expected results on Friday, while newly public Porsche showed its former parent how it’s done.

What does this mean?

VW made €4.3 billion ($4.3 billion) in operating profit last quarter, 65% more than the same time last year – despite the carmaker allotting €1.6 billion to cover one-off charges after halting Russian activities and listing Porsche. But that comes with a few caveats: chip shortages stunted last year’s sales, making that impressive uptick a little less impressive. And even then, that lower-than-expected 65% growth still leaves the firm’s operating profit below pre-pandemic levels.

That chip shortage has let up this year, but it’s far from over. Mix in ongoing supply chain delays that VW sees sticking around, and that toxic twosome pushed the firm to lower this year's delivery targets. The carmaker now expects 2022 deliveries to match last year’s, a disappointing downgrade from its previously forecast 5 to 10% rise. Investors paid attention to caveats, and sent VW’s shares down 3% after the news.

VW stock
Source: Google Finance

Why should I care?

Zooming in: The student becomes the teacher.

Porsche also reported results on Friday, after VW listed it on the stock market just last month. The luxury carmaker made 41% more operating profit during the first nine months of this year versus the same time last year, and ballooned its operating profit margin by over three percentage points too. Luxury brands find it easier to pass rising costs onto their generally affluent customers, after all, and that nifty trick might have played a part in helping Porsche steal the title of Europe's most valuable carmaker from VW earlier this month.

Porsche overtakes VW

The bigger picture: Future focused.

The European Union (EU) reached a deal last week to effectively ban sales of combustion-engine cars from 2035, which – given the EU’s reputation for setting standards globally – will impact carmakers around the world. But VW’s already on it, having previously said it’ll stop selling combustion-engine cars in Europe sometime between 2033 and 2035.

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