New production and lower costs cannot fully offset fading shortage profits. I expect partial oil-supply recovery to pull earnings below what today's share price requires, supporting a $142 twelve-month target.
Key points
- $142 a share is my October 2027 target as shortage profits fade.
- $85 a barrel is my 2027 Brent forecast, not a return to cheap oil.
- 16.2 times my 2027 earnings forecast is too much for this cycle.
The call
The market is too optimistic about how long shortages last. At 14 times annual earnings, today's share price requires $46.9 billion of 2027 profit. Alternatively, it requires 16.2 times my profit forecast. Reopened export routes and refinery repairs threaten the scarcity supporting those expectations.
Quarterly profit as supply recovers ($ billions)- Q2 FY26 reported adjusted
- Our Q2 FY27E
July 31, 2026 earnings release; our Q2 FY27E forecast excludes charges and timing effects on the same basis.
I expect partial recovery, not a collapse. My 2027 forecast assumes annual fuel-business profit falls to $8 billion. I credit upstream growth with $3 billion of annual profit improvement against the latest quarter's annual pace. Guyana's next vessel helps, but earlier project-cost recovery reduces Exxon's share of production.
Valuation
| Driver | My estimate |
|---|
| 2027 upstream profit | $30.8 billion |
| 2027 total adjusted profit | $40.6 billion |
| 2027 average diluted shares | 4.0 billion |
| 2027 adjusted earnings per share | $10.14 |
| October 2027 earnings multiple | 14 times |
| Twelve-month target, rounded | $142 a share |
The target depends on 2027 Brent oil pricesOur model, Oct. 8, 2026; $0.46bn annual profit per $1/barrel; fuels profit fixed at $8bn; 14 times earnings.
Fourteen times rewards low-cost growth without treating shortage profits as permanent; the latest 5.27% ten-year Treasury yield argues against a richer multiple. Cash generation exceeds earnings, but customer bills absorb cash and reported free cash flow includes asset sales. Prolonged shortages could lift the shares substantially, making this a sell rather than a strong sell.
Risks
- Supply stays constrained: watch Middle East export flows and oil inventories for stalled recovery.
- Refinery profits prove durable: watch diesel shortages and the company's refining-margin indicator.
- Growth beats my allowance: watch Permian cash costs and Guyana cash generation, not gross production alone.
What would change my mind
Two consecutive reported quarters supporting annual adjusted profit above $47 billion despite recovering Middle East exports would overturn my sell.