Oil prices corrected in early October, falling 10% from their highs, and Exxon Mobil (NYSE: XOM) with it, but this is not the time to start shedding energy stocks. The price of WTI is up more than 13% from the start of the 3rd quarter and relatively flat compared to the same period last year, suggesting solid results in the current and following quarters.

The 10% decline in Exxon shares may not be over, but investors should not expect it to worsen significantly. The bottom will be found soon, and the uptrend in energy stocks will resume, making this correction an opportunistic time to buy. 

1) OPEC Helps Exxon Boost Profits With Higher Oil Prices 

Today's biggest story in the energy patch is OPEC+ production cuts and their impact on oil prices. The cuts have global production below demand despite rising production in non-OPEC nations. This situation has oil prices rising, providing a double tailwind for US oil producers. This is seen clearly in Exxon’s pre-announcement for Q3. That announcement expects higher oil and liquids prices to boost its earnings in Q3. 

Exxon Mobil expects revenue and earnings to fall from last year due to the incredibly high oil and natural gas prices in 2022 and high throughput in the downstream businesses. However, higher oil prices have execs forecasting $8.3 to $11.4 billion in operating profits, which is up sequentially and provides a substantial upside compared to the analysts' consensus. The analysts' consensus expects an operating profit of $9.22 billion compared to the guidance mid-point of $9.85. 

And oil prices? The oil price is correcting on fears of inflation, high-interest rates, and demand destruction, but demand destruction is yet to be seen in the data. WTI will likely trend higher. The latest data shows US crude and distillate stockpiles falling more than expected. 

2) The Market is Buying Exxon 

The market buys Exxon, including retail investors, analysts, money managers, and institutional buyers. Regarding retail investment, Exxon Mobil is 1 of Marketbeat’s Most Followed Stocks, ranking in 18th position over the previous 7 days and 14th over the past 30. Regarding analysts, 21 analysts are tracked by Marketbeat and rate the stock a Moderate Buy with a price target 11% above recent action and up 28% YOY. Regarding the institutions, they own about 60% of the stock and have been buying it on balance for the last 2 years. Q3 saw an uptick in institutional buying. 

3) Exxon Mobil Offers Value and Yield 

Exxon Mobil trades at only 11X its earnings outlook, providing a value compared to the broad market, as do many energy stocks today. What you get is a solid 3.26% yield that comes with a high safety score. The company out less than 30% of its earnings and has sustained annual dividend increases for 4 decades. The pace of increase may not be large but may be compounded by share repurchases. 

4) Exxon’s Balance Sheet is Healthy 

Exxon’s debt is up compared to 2019 but falling sharply relative to peak COVID levels. The company’s cash balance is also up sharply, driving a significant reduction in net debt. The debt-to-equity ratio is also low at 20%, suggesting a high level of distribution coverage. Assuming that cash flow remains robust, and there is no reason to think otherwise, debt should continue to fall over the next few quarters to several years. 

5) A Golden Cross for Exxon Mobil 

The technical picture is robust. The oil price and the Exxon price both fired Golden Crossovers recently and have another 15 to 20 months of the bull market ahead of them. The pullback in price action should find support at or near the 150-day EMA and present a solid buy signal. If not, this stock may fall to the $105 region, where it would provide a deeper value and higher yield.