Buffett Increases Chevron Stake: Is it a Smarter Pick Than ExxonMobil?

Exxon MobilCorporation XOM and Chevron Corporation CVX are two integrated energy giants. In the past year, CVX has gained 11.4% against XOM’s 2.9% decline. Image Source: Zacks Investment ResearchNotably, during the second quarter of this year, Warren Buffett's Berkshire Hathaway increased its stake in Chevron by 2.9%, thereby raising its position in the firm to about $19.3 billion, per Stockcircle.  However, before coming to investment conclusions, it would be ideal to compare both the stocks’ fundamentals and valuation parameters.ExxonMobilOutlook Robust on Guyana Discoveries & Permian PresenceExxonMobil has a strong presence in offshore Guyana resources and the Permian, the most productive basin in the United States.The integrated energy company announced that it discovered a massive amount of oil—nearly 11 billion barrels—off the coast of Guyana. To put it simply, this is the largest oil discovery anywhere in the world in the last 15 years. In the region, XOM has three active projects, combinedly producing at a rate of roughly 650,000 barrels per day. XOM expects a total of eight projects in the region to be online by 2030, which will produce a total of 1.7 million barrels of oil equivalent per day (MMBoE/D).In the Permian, the energy giant is employing advanced technology to get much more oil out of each well, thereby improving oil recovery. In the most prolific basin, XOM expects to produce 2.3 MMBoE/D by the end of this decade, suggesting a surge from the current 1.6 MMBoE/D.Betting Big on Earnings & Cash Flows by 2030ExxonMobil expects to generate considerable earnings and cash flows in the years to come. Following its significant investments in Permian, Guyana resources and projects related to chemicals and refining, the integrated energy major anticipates generating $20 billion more in earnings and $30 billion more in cash flow compared to 2024 by the end of 2030.ChevronHess Acquisition to Create Immediate Financial BenefitsAs Chevron has successfully executed its acquisition of Hess, it has expanded its portfolio with premium assets with long-term growth potential. With the combination of the two companies’ resources and expertise in key regions like Guyana, the Bakken shale and the Gulf of Mexico, CVX is now better positioned to meet growing energy demand while operating smoothly at lower costs.Importantly, with the combination of the companies, Chevron now projects to achieve $1 billion in annual cost savings by the end of this year, which is six months faster than originally planned. Thus, the integrated energy giant is well poised to generate additional lucrative cash flows for shareholders, which is not far away. It can be said that CVX will continue to return cash to shareholders through both share buybacks and dividends. Notably, the company has already returned more than $5 billion each quarter for 13 consecutive quarters.XOM vs CVX: Which Stock is Better?Investors should also know that both ExxonMobil and Chevron have significantly lower exposure to debt capital. While CVX has a debt-to-capitalization of 16.7%, XOM has a debt-to-capitalization of 12.6%. Thus, both integrated players are well-positioned to navigate uncertainty when business turns unfavorable. Image Source: Zacks Investment ResearchComing to the valuation story, both CVX and XOM are overvalued compared with the industry’s composite stocks. While CVX is currently trading at a trailing 12-month enterprise value-to-EBITDA (EV/EBITDA) of 7.11x, XOM is trading at a trailing 12-month EV/EBITDA of 7.15x. This represents a premium compared with the broader industry average of 4.36x. Image Source: Zacks Investment ResearchThus, although the outlook remains bright for both ExxonMobil and Chevron, investors shouldn’t rush to bet on the pricey stocks. However, those who have already invested should retain the integrated energy stocks. But investor expectations should differ for XOM and CVX. Those holding CVX can look forward to immediate cash returns from the Hess merger synergies, while XOM shareholders are positioned more for long-term growth. Currently, both CVX and XOM carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in the coming year. While not all picks can be winners, previous recommendations have soared +112%, +171%, +209% and +232%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Chevron Corporation (CVX): Free Stock Analysis Report Exxon Mobil Corporation (XOM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks