ExxonMobil and six other companies accounted for 25% of the S&P 500’s (SPX) profit in the fourth quarter of 2022. Here are three of the index’s most profitable companies, other than XOM.
ExxonMobil (XOM)
ExxonMobil (NYSE:XOM) was a powder keg waiting to explode–in a good way.
For several years, there was a case made for it to transition more quickly to alternative energy sources. That kept XOM stock in the dog house. It traded as low as $32 in October 2020. And then energy prices started to move higher. It’s up 263% in the past 28 months.
How many stocks can make this claim? Not many.
With higher energy prices came record profits. At the end of January, ExxonMobil reported a 2022 annual profit of $55.7 billion, eclipsing its previous record of $45.22 billion in 2008.
“While our results clearly benefited from a favorable market, the counter-cyclical investments we made before and during the pandemic provided the energy and products people needed as economies began recovering and supplies became tight,” CEO Darren Woods said about the results. “We leaned in when others leaned out.”
At some point, the party will end. In the meantime, Woods can take a victory lap. Profitable, for now, ExxonMobil and six other companies contributed to 25% of the S&P 500’s Q4 2022 profits.
Here are three super profitable index stocks to buy other than ExxonMobil.
Microsoft (NASDAQ:MSFT)
Microsoft (MSFT) is one of the seven names accounting for 25% of the S&P 500’s Q4 2022 profits. Its non-GAAP net income in Q2 2023 (Dec. 31, 2022) was $17.4 billion, or 33% of its $52.7 billion in revenue.
Investors were worried about the company’s falling Windows OEM revenue — the revenue generated from other PC manufacturers putting Windows on its machines — and hardware sales from Surface devices and HoloLens mixed-reality headsets. Their concerns sent Microsoft’s share price lower for a short time in January.
However, it’s now up more than 13% year-to-date through Feb. 14, and analysts are warming to the tech behemoth once more.
Morgan Stanley analyst Keith Weiss wrote in a note to clients on Feb. 13 that he sees five consecutive quarters of earnings per share growth coming after the setback in Q2.
“Near-term cyclical impacts create an attractive entry point into one of the best secular-growth stories in tech,” Weiss wrote in a note to clients. The analyst has a $307 target price and an Overweight rating on its stock.
ARK Invest analyst Will Summerlin recently argued Microsoft could be investing billions in ChatGPT-maker OpenAI as a way to take clients from Google.
“We believe that Microsoft is aiming not only to lower Google’s search margins, but also to dissuade Alphabet from running Google Cloud and other businesses at a loss,” Summerlin stated in a Feb. 13 research note.
Out of 29 Wall Street analysts, 25 have a buy rating on MSFT stock, with an average target price of $291.63, 8.3% higher than where it’s currently trading.
Microsoft remains one of the most profitable companies in America.
Regeneron Pharmaceuticals (NASDAQ:REGN)
Regeneron (REGN) reported its Q4 2022 and full-year results on Feb. 3. The good news is that it beat analyst estimates on both the top and bottom lines.
Excluding REGEN-COV/Ronapreve (casirivimab and imdevimab), the company’s Covid-19 antibody treatment, sales were $3.02 billion, 14% higher than in Q4 2021. Including the two drugs, revenues were down 31% to $3.41 billion, but $310 million better than the consensus estimate.
On the bottom line, it earned $12.56 a share on an adjusted non-GAAP basis, 23% higher than the analyst estimate of $10.18. Both were convincing beats. REGN shares gained nearly 5% on the news but have since given back most of these gains.
While Regeneron’s free cash flow for the year was down 32% to $4.42 billion, it was still a very high 36% of revenue and 86% of net income. Its return on assets and return on invested capital are healthy at 15.9% and 18.4%, respectively. Both metrics are in the same league as ExxonMobil’s record-breaking numbers.
On Feb. 8, Regeneron announced that its Eylea (Aflibercept) injection was approved by the U.S. Food and Drug Administration (FDA) as the first pharmacologic treatment for preterm infants with retinopathy of prematurity (ROP), a leading cause of childhood blindness.
Eylea now treats five different retinal conditions caused by ocular angiogenesis, a leading cause of severe vision loss. Eylea had 2022 sales of $6.3 billion (nearly 52% of overall revenue), 8% higher than a year earlier.
REGN is a winning healthcare stock, up 127% over the past five years, more than double ExxonMobil’s performance.
EOG Resources (NYSE:EOG)
You couldn’t have a story about profitable stocks other than ExxonMobil without an energy stock in the mix. After all, the S&P 500 energy sector has a total return of 43.1% as of Jan. 31. None of the other 10 sectors come anywhere close.
EOG Resources (EOG) has a total return of 25.21% over the past 52 weeks through Feb. 14.
The shale producer reported healthy Q3 2022 results in November with $7.59 billion in revenue on the top line and $2.18 billion ($3.71 a share) on the bottom line with a free cash flow of $2.27 billion, 66% higher than a year earlier.
As a result of its strong cash flow generation, it finished the quarter with net cash of $188 million, up from $2.02 billion net debt in Q2 2022. EOG upped its quarterly dividend payment by 10% to $3.30 on an annual basis, good for a 2.5% yield.
To add to that yield, EOG paid out a $1.50 special dividend on Dec. 30 to shareholders of record as of Dec. 15. That was the company’s fourth special dividend of 2022. Including the $1.50 payment, EOG shareholders received $8.80 a share in dividends last year. Based on its current share price, that’s a healthy 6.6% yield.
In early January, CEO Ezra Yacob said the global oil supply this year will tighten (higher oil prices) while natural gas prices will rise from 2025 and beyond.
That’s good news for EOG shareholders.
