ExxonMobil Holdings Corporation (NYSE:XOM) is the largest oil company in the United States, and one of the largest integrated energy companies in the world. The stock hit an all-time high earlier in March and has gained more than 34% this year, fuelled by soaring energy prices and solid earnings amid the disruptions in the Middle East.
Following a pullback over the last few months, Exxon has started to regain momentum, and Morgan Stanley expects the rally to continue. On August 19, the firm boosted its price target on XOM from $168 to $177, while maintaining an ‘Overweight’ rating on its shares. The revised target implies an upside of over 7% from the current levels and exceeds Exxon’s previous record high of just over $176 achieved earlier this year.
Morgan Stanley’s bullish stance follows a broader update to its energy sector forecasts to account for its latest 2026 outlook and current strip prices. The analyst firm expects integrated energy companies, such as Exxon, to catch up with pure-play refiners, which have benefited much more significantly from the sharp surge in refining margins.
While ExxonMobil has delivered a strong year-to-date performance, its gains have lagged significantly behind those of major refiners like Valero Energy and Marathon Petroleum, which have both seen their share prices more than double since the beginning of 2026.
ExxonMobil Has the Cash, Growth, and Returns to Keep Winning:
Although ExxonMobil Holdings Corporation (NYSE:XOM) fell behind earnings expectations in Q2, its business fundamentals remain strong, and the oil and gas giant posted its biggest quarterly profit in four years. Moreover, the company delivered its highest upstream production in more than two decades, excluding the temporary disruptions in the Middle East.
ExxonMobil‘s healthy balance sheet further adds to its appeal. The company generated $17.2 billion in free cash flow in the second quarter and reduced its net debt by approximately $7 billion. Exxon’s structural cost savings, which have reached $16.3 billion since the company began overhauling operations a few years ago, will help further lift its earnings and cash flows.
America’s largest oil company is also known for its high shareholder returns. The energy behemoth returned $9.4 billion to shareholders in the second quarter, through $4.3 billion in dividends and $5.1 billion in share repurchases. The company has increased its annual dividend per share for 43 consecutive years, a distinction achieved by less than 5% of S&P 500 companies, and boasts an impressive annual dividend yield of 2.50%.
Exxon’s dominant position in the highly lucrative Stabroek block in Guyana is a major growth engine. It leads the consortium responsible for Guyana’s entire oil output and currently produces more than 900,000 bpd from the country. This figure is set to grow even further after a fifth floating production platform begins operations in the fourth quarter. Exxon’s heavy investments in the Permian Basin, the ballooning LNG sector, and higher-value chemical businesses will further support its growth in the coming years.
Exxon’s Earnings Boom Faces a Geopolitical Reckoning:
Although ExxonMobil’s latest quarterly profit was spectacular, investors need to keep in mind that it was a result of unusually favorable market conditions. If a peace agreement is achieved, global crude prices and refining margins would eventually normalize and significantly weigh down earnings and cash flows. Additionally, despite delivering its highest profit in years, Exxon still fell behind Wall Street’s earnings expectations.
The energy giant is also highly exposed to the US-Iran war due to its major position in Qatar’s LNG industry. Qatar’s LNG infrastructure was heavily damaged by a string of Iranian attacks earlier this year, resulting in around 450,000 barrels per day of lost output for Exxon in the second quarter. The company revealed that if the waterway of Hormuz remains closed for the entire third quarter, its output from the Middle East would decline by about 750,000 boepd compared with last year.
Conclusion:
Morgan Stanley remains bullish on ExxonMobil Holdings Corporation (NYSE:XOM), expecting the strong refining margins to propel the stock to new heights. Although Exxon has posted strong returns so far this year, its weaker performance compared to pure-play refiners indicates that the stock may have more upside ahead.
Market Sentiment:
ExxonMobil Holdings Corporation (NYSE:XOM) was held by 96 hedge funds in the Insider Monkey database at the end of Q2 2026, up from 94 in the previous quarter. However, while the total number of hedge fund investors increased, their cumulative stake value in XOM fell from almost $11.7 billion in Q1 to just over $11.3 billion at the end of the second quarter.
READ NEXT: Morgan Stanley Expects Chevron (CVX) to Hit a New High. Can the Oil Giant Keep Rallying? and BP Just Returned to Venezuela. Brilliant Bet or a Big Mistake?
Disclosure: None. This article is originally published at Insider Monkey.
