ExxonMobil: The Comeback (Part 2: Peak to Peak)

The Gist: This post covers the financial history of ExxonMobil from its peak in the 1970s through the 2008 peak.

You can find Part 1: "Into the Abyss" HERE, which retraced the COVID lows, drew some parallels to XOM’s past, and took us up to the 1970s.

Let's begin.

The 1970s is often thought of as a “Super Cycle” but during the period, Exxon shares served more as a means for preserving capital rather than achieving double-digit compound growth.

For example, on the left, I show that for most of the decade, its inflation-adjusted share price was largely range-bound yet outperformed the S&P 500. On the right, I show that Exxon stock yielded more in dividends than the S&P 500, which is important in times of ever-rising prices when you want a dollar today and not tomorrow.

During this period, margins actually fell.

While taxes rose.

But at the bottom line, profits still grew, and returns on capital (ROCE) made two peaks: the first in 1974 and the second in 1980.

However, judging from the above chart, it was just another typical ROCE cycle. The much larger one would come in the 2000s, but I am jumping ahead.

Exxon’s valuation compressed over this period as inflation compressed multiples across all sectors, including energy, albeit to a lesser extent than growth stocks.

The 1970s were defined by the peak in production when both Exxon and its future merger partner Mobil reached an all-time high in their oil and gas production profiles.