Insider buying is often viewed as a bullish sign for a stock, since company executives, board members, and major stakeholders are often considered to have better-than-average insight into a company's financial outlook. So, when insiders buy shares - especially in large amounts - it's worth paying attention for potential buying opportunities.
That said, one well-known Dividend Aristocrat just scored a massive investment from one of its own board members, despite some significant volatility on the charts in recent months. Here's a look at this $26.5 million insider buy.
Oil Major Insider Adds More Stock Worth $26.5 Million
Specifically, Exxon Mobil (XOM) independent director Jeff Ubben - an ESG-focused addition to the oil major's board back in 2021 - purchased 250,000 shares of the company on Nov. 6, at an average price of $105.96. The transaction totaled roughly $26.5 million. Following this transaction, Ubben now owns a 0.053% stake in XOM.
This is the third significant purchase of Exxon stock by Ubben this year, all around the same price range - near $106-$107. Ubben, whose past directorship stints include AppHarvest (APPHQ) and Nikola (NKLA), bought 650,000 shares of XOM across two days over the summer, and has spent a total of $95.9 million year-to-date across all three purchases.
Previously, in 2022, he purchased 1 million XOM shares worth about $88.5 million.
So, should you follow this insider into XOM? Let's take a look.
About Exxon Mobil
Founded in 1892 and based out of Harris County, TX, Exxon Mobil is a multinational oil and gas corporation. Exxon engages in both upstream and downstream activities, including exploration, production, transportation, refining, and marketing of oil and gas products. Exxon is one of the largest refiners of crude oil and owns one of the largest fleet of oil tankers in the world. Its market cap currently stands at an impressive $408 billion.
Exxon Mobil is a “Dividend Aristocrat,” which means that the company has raised its dividends consecutively for at least 25 years. The current dividend yield is 3.69%, and the payout ratio of 34% indicates continued room for these payouts to grow.
Oil prices have been volatile lately, with December crude futures (CLZ23) alternately propped up by OPEC+ supply cuts and flaring geopolitical tensions - and then just as quickly tamped down by concerns over softer demand. Exxon stock has likewise been volatile, and is down by 3.6% YTD.
Expansion in the Permian Basin
Along with oil prices, investors also recently cast a wary eye on Exxon's pricey expansion into the Permian Basin - the largest oil-producing basin in the U.S., accounting for over 40% of total domestic oil production. The basin is also a major source of natural gas, accounting for over 15% of production.
Exxon's move to acquire Pioneer Natural Resources (PXD) - one of the largest producers of oil and natural gas in the Permian Basin - was met with selling by investors due to its high price tag, but analysts largely gave the deal their seal of approval. With this acquisition, Exxon will now have 16 billion barrels of oil equivalent resources in the Permian basin. Management expects Permian production volume to increase to 2 million barrels of oil equivalent per day [MOEBD] in 2027 following the acquisition.
Inside Exxon's Latest Earnings
In its Q3 earnings report on Oct. 27, Exxon reported stronger-than-forecast revenue of $90.76 billion, though adjusted EPS of $2.27 fell short of expectations. For fiscal 2024, analysts are targeting earnings growth of 7.6% to $10.01 per share.
Meanwhile, XOM's liquidity position remained solid in Q3 with a cash balance of about $33 billion. Notably, long-term debt also eased to $36.5 billion from $40.6 billion at the beginning of the year.
Production activities also remained strong in Q3. Net production of crude oil, natural gas liquids, bitumen and synthetic oil rose to 2.397 million barrels per day (kbd) from 2.389 million in the year-ago period.
Analysts Think Exxon Is a Buy
Exxon, which closed the week just a few points below Ubben's recent purchase prices, appears to be fairly valued at current levels. The stock is trading at a forward price/sales ratio of 1.16, which is below the sector median of 1.38.
On average, analysts have a “Moderate Buy” rating on the stock, with a mean target price of $129.44. This denotes an upside potential of roughly 24.7% from current levels. Out of 17 analysts covering the stock, nine have a “Strong Buy” rating and eight have a “Hold” rating.
