I’m not exactly sure why someone would think ‘price in the past’ would be meaningful as a metric of present value, or why you think it refutes my comment about peak earnings.
I mean, imagine a stock, that earns $1/year, pays it all out as a dividend. It’s on a PER of 8 for a decade. The price is $8 constantly through the decade.
Suddenly, it has a great year. It makes $100/year. The price jumps to $800. The PER is still 8.
Over this period it has a P/E of 8 constantly.
But is it worth paying $800 for, or are you paying for ‘peak of cycle earnings’ if you pay that? What will happen if the earnings revert back to trend ($1)?
IIRC the largest part of the profits of oil companies of the last 8 years were made in the last 18 months or so, hence the analogy.
True, Exxon may be priced out to get in so late. Downside, earnings will probably stay near Q4 for most of 23. As I said, Saudi Oil Production will not continue at peak production and Russian Oil reduced exports will continue, Oil will average $90bbl throughout 23. Who knows?
The point is, Exxon is ramping up oil export and production.
I should point out that I’ve been consistently warned on this board since last year that Exxon is a risky investment.
You’re investing in a company (Intel) that’s just announced an assortment of cost-reduction efforts aimed at $3 billion in cost savings in 2023, growing to $8 billion-$10 billion annualized by the end of 2025; which mean massive layoffs. Exxon can’t hire enough people.
Looking ahead, Intel is cheap and maybe where you want to be in four or five years. That’s a long time to wait for a return. I still would argue that in ’23 Energy markets are going to see a big increase in revenue.
Furthermore, companies like LNG and CEIX are positioned to increase earnings with the disruptions of the Energy Markets. It certainly has been the place to be since the Russian invasion. While, Exxon and CEIX have increased EPS in the last year and beat expectations significantly, GOOGL has missed its earnings est consistency in the past year.
Going forward, it’s a question where you can stay invested in the market in the next year, which will not be a good year for stocks. So the question comes back to “peak earnings.” I don’t think that ’22 will see the end of peak earnings in the Energy Market. Intel is already telling you that earnings will be waning going into and through ’23. Your analogy portents that Oil will go back to $50bbl on average for ’23. I’m betting it will be $90bbl.
I bought oil in 2020 when it looked like what Intel does right now.
It went alright.
I still would argue that in ’23 Energy markets are going to see a big increase in revenue.
Depends. Putin could have a heart attack tomorrow. A new Russian premier could cancel the war, announce reparations on condition the west renews purchasing oil/gas from Russia. That’s not impossible. It’s very hard to know what the world will look like in a year. I didn’t guess it would look like this, back in 2021.
If ‘pivoting on one man’ like that seems a bit much to imagine, all it might have taken for a much darker 2022 is if Zelensky had run instead of declaring he needed ‘ammo, not a ride’. Or if the teams of Russians looking for him at the start of the war, had found him. Perhaps Russia would be at the Polish border then, and torture camps would be all over Ukraine extinguishing hope.
Intel’s the same, it’s in the process of pivoting on two men; Biden’s support for a renewal of American factories and Gelsinger’s renewal of Intel’s structure, a move to foundries.
Hard to predict these things.
don’t think that ’22 will see the end of peak earnings in the Energy Market.
Might be, might not be. But busts tend to follow booms.
Your analogy portents that Oil will go back to $50bbl on average for ’23.
What the heck? $50 isnt’ the inflation adjusted typical earnings of an oil company the last ten years. Don’t put ridiculous strawman words in my mouth, please.
Don’t know if I’m wayyyy too early on Intel or not. Hard to know. It’s certainly quite a bit down from where it was in… the year 2000.
Don’t know if there are numerous qualified people around to hire. Industry was hit hard in the '90’s, causing many early in their career to move to another industry, and again during Covid. We’ve been retired for 4 years now, so not sure if difficulty in hiring people who know what they are doing is still an issue. Heck, it’s hard enough for any company to hire on decent people right now. Someone we know recently got hired on to a petroleum based chemicals company, getting a 401 K with a 10% match. That doesn’t happen if it’s easy to attract employees.
Maybe it’s Exxon doing so well they need more employees, maybe it’s more about simply not being able to get employees, like just about everyone else.
Mostly, one does not get a specialized degree, rather you have a Chemistry or various engineering degrees and then are specialized on the job. It’s not so much those in their 20’s, but those in their 30’s and 40’s and even 60’s that decided they wanted more job security, like many of our co-workers, and myself frankly, that chose other paths in prior down turns. It is such a boom-bust industry. Was very hard both working for the same company and experiencing layoffs multiple times a year. Would it hit one of us? Both?
Ironically, DH had a great deal of job security given how few people there were with his qualifications, given the number in his cohort that bailed previously. He still gets hit up by head hunters. As long as the company survived, he would have a job.
The petroleum refining industry pays very very well comparatively. I was offered a 30% higher starting wage than the offer from the specialty chemical company I had cooped for 15 months straight, and who loved the work I did. That is what will tempt those 20 something year olds.