Next week, oil giant Exxon Mobil Corporation (NYSE:XOM) will report its fourth quarter and full year 2016 results.  Since I last wrote about Exxon Mobil stock, it looks like fourth quarter analyst estimates have come down slightly, but this year could come in a bit stronger than initially anticipated.

Annual (2016) profits are now projected to come in at $2.19 per share, versus a previous estimate of $2.26 per share back at the end of December.

That’s not a significant decline, and it is actually about where the estimate stood 90 days ago. For better or worse, the market watches earnings trends closely, and stocks that experience estimate increases can perform quite well.

Where XOM Stock Stands Today

Despite the near-term dip, estimates for all of 2017 have ticked up a bit. The late-December earnings figure was $4.11 per share, but it has ticked up to $4.22. Oil prices haven’t moved much and stood recently at around $53 per barrel, or about half of where they stood back in May 2014.

Exxon has responded to the unexpected drop in oil prices by furiously working to cut its capital expenditures and related activity to explore for and drill for oil, natural gas and related fossil fuels.  This should help XOM stock to continue to pay a dividend that currently amounts to a 3.53% dividend yield.

For the last couple of years, the drop in energy prices has meant that Exxon hasn’t generated enough cash to simultaneously invest in its businesses, buy back stock and support its dividend. Instead, Exxon Mobil stock has been able to rely on its stellar credit rating and issue debt to fulfill its obligations.

There is very minimal risk that XOM stock will go out of business soon, if ever. But there has been little question that things have needed to change until oil prices bounce back up. Decreasing business spending certainly helps, and management has cut its stock repurchase activity substantially.

It also looks like Exxon is shifting where it invests. The biggest news since the third-quarter earnings release was an announcement on Jan. 17 announcing the purchase of 275,000 leasehold acres in the Delaware Basin, a “highly prolific, oil-prone section of the Permian Basin” (according to the company press release).

The initial purchase price is $5.6 billion and will be paid in Exxon Mobil stock. Future payments of $1 billion could be paid to the sellers (companies owned by the Bass family in Fort Worth, Texas), depending on just how prolific the oil and gas production ends up being on the acquired land. The estimated production potential is 3.4 billion barrels of oil equivalent (a term to combine oil with gas production potential, the latter of which is converted from cubic feet of natural gas).

This is a rather significant addition to XOM’s stated reserves. It should update investors in February for the 2016 figure (yes, it is made in arrears), but the 2015 figure stated 24.8 billion oil equivalent barrels. This figure can also be boosted by exploration finds, such as the find off the coast of Guyana that adds 100 to 150 million in oil equivalent barrels. The find was also announced this month.

Exxon Mobil Stock’s Investment Appeal  

It is a stretch to be bullish on Exxon shares these days. Current investors are at least breathing a sigh of relief after the last couple of years. At a minimum, there is now solid clarity that XOM will live within its means and generate enough cash from its businesses to invest and pay a dividend. With any excess it can buy back Exxon Mobil stock again, and even pay down debt.

The forward price-to-earnings ratio on this year’s earnings estimate is 20.3, or only slightly ahead of the market multiple. This is well above XOM’s five-year average P/E of 15, but earnings were booming back when oil was closer to $100 per barrel.

Bottom Line on XOM

For Exxon’s share price to move meaningfully higher going forward, oil prices will really have to rally back toward past highs. The dividend yield of 3.53% is certainly high enough for loyal XOM stock owners to stay put and wait for another energy rally.

A final consideration is that Exxon Mobil stock is probably the best investment candidate among the largest industry players. Its shareholder returns (as measured by return on invested capital, or ROIC), has bested rivals including BP plc (ADR) (NYSE:BP), Chevron Corporation (NYSE:CVX), Total SA (ADR) (NYSE:TOT) and Royal Dutch Shell plc (ADR) (NYSE:RDS.A, NYSE:RDS.B) over both the long haul and during the current drop in oil prices. If anyone is going to excel in the current environment, it is likely to be XOM.

As of this writing, Ryan Fuhrmann did not hold a position in any of the aforementioned securities.