Exxon Mobil hits all-time highs but still has more upside—here’s why

Exxon Mobil is a strong defensive stock, favored by investors for its consistent dividends, healthy yield, and share buybacks.

Its strong balance sheet makes it one of the safest investments in the energy sector. As a result, the stock also commands a premium valuation.

XOM is currently trading just a couple of percentage points below its all-time highs.

Geopolitical tensions have kept the price high, but one could argue that with multiple global conflicts, oil prices have probably already priced in a lot of bad news.

This would generally prompt investors to think if it's time to cash out.

But if recent analyst estimates are anything to go by, XOM could be making new highs very soon.

Scotiabank upgrades XOM to Sector Outperform

Paul Cheng, an analyst at Scotiabank, has just released his note on the company, upgrading it from Sector Perform to Sector Outperform.

He believes the company will continue to enjoy higher multiples thanks to its strong portfolio and global oil market uncertainty.

The results from the Pioneer Natural Resources acquisition should also start showing up on the company's income statement soon. Cheng said:

Boost from securing the largest CO2 offshore site

The company has announced today that it just completed the largest offshore CO2 storage lease in the United States.

The site is spread over 271,000 acres and together with the existing onshore storage facilities, makes XOM a strong player in carbon capture.

The company aims to help reduce carbon emissions with this project, even though it is itself in the business of producing hydrocarbons.

From the shareholder perspective, this move can be considered a political play, keeping environmental activists happy without sacrificing the company's main line of business.

Israel War a potential short-term boost

Israel continues to aggressively pursue its enemies across its neighboring countries.

What started as a war in the territory of Gaza has now spilled into Lebanon and Syria.

These conflicts continue to maintain an upward pressure on oil prices, helping the company improve its profitability.

However, Saudi Arabia's intention to continue increasing production to keep oil prices low cancels out the positive effect these conflicts can have on the company.

The company is also actively divesting out of its foreign assets to reduce exposure to unstable regions and economies.

It has sold oil assets in Malaysia, Nigeria, Iraq, and Equatorial Guinea this year alone.

While unwinding these assets, the company is expanding its operations in the relatively safer western hemisphere.

In the short term, the company could benefit from oil price volatility.

In the long run, increasing production from non-OPEC countries and improved business assets should help the company continue to deliver shareholder returns like before, making it a great investment even at these price levels.