President Donald Trump’s recently imposed tariff has rattled the equity market. The question in everybody’s mind is whether the tariffs will be in place for an extended period. If the tariffs stick around for a while, U.S. spending across all businesses will probably take a hit in the face of increased prices. Eventually, there will be a contraction in the American economy. If there is a slowdown, then energy demand will go down, which could weigh heavily on the business performance of most energy companies.

Now, these are still assumptions, and nobody is sure of what is going to happen, thereby fueling ambiguity. Amid the uncertain and turbulent energy business, should energy investors keep a close eye on energy giants like Chevron Corporation CVX and Exxon Mobil Corporation XOM?

Integrated Business Model & Strong Balance Sheet to the Rescue

Integrated energy companies are relatively less prone to uncertain business scenarios. This is because when their upstream business suffers from low oil prices, they can keep afloat by banking on their downstream operations. If these companies have strong balance sheets, they can confidently leverage their financial strength to avail loans during uncertain times at favorable rates, maintaining their operational stability even during turbulent times.

2 Must-Watch Energy Majors: CVX, XOM

Chevron

Chevron, currently carrying a Zacks Rank #3 (Hold), is among the integrated energy giants with a presence in both the upstream and downstream energy spaces. In the low-cost Permian – the most prolific basin in the United States – CVX has a strong footprint, which will likely aid the company’s production growth in the long run. Chevron’s capital discipline is also noteworthy, as this will pave the way for considerable cash flow generation. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, CVX can likely navigate the current energy market uncertainty with confidence, backed by its strong balance sheet and integrated business model. Chevron’s debt-to-capitalization is at 13.8%, considerably lower than the 29% of the composite stocks belonging to the industry.

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ExxonMobil

ExxonMobil is the largest non-government integrated energy company in the world. In the prolific Permian and Guyana resources, XOM has a solid pipeline of profitable projects, securing a healthy production outlook.

XOM with a Zacks Rank of 3 also has a strong balance sheet that it can rely on to sail through the current turbulent tariff-induced business environment. ExxonMobil’s debt-to-capitalization is 13.4%, which is also at a very low level and, hence, is significantly below the industry.

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This article originally published on Zacks Investment Research (zacks.com).

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