Does Exxon Mobil Have a Bright Future?

With shares of Exxon Mobil (NYSE:XOM) trading around $102, is XOM an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Exxon Mobil is a manufacturer and marketer of commodity petrochemicals like olefins, aromatics, polyethylene, and polypropylene plastics, as well as a range of specialty products. The company has a number of divisions and affiliates with names that include ExxonMobil, Exxon, Esso, and Mobil, which operate or market products in the United States and other countries. Exxon Mobil’s principal business is energy, involving the exploration for and production of crude oil and natural gas; manufacture of petroleum products; and transportation and sale of crude oil, natural gas, and petroleum products.

Exxon Mobil has reported it will invest $1 billion to install a delayed coker unit at its 320,000-b/d Antwerp, Belgium, refinery. The unit, which will convert heavy, higher sulfur residual oils into transportation products such as marine gas oil and diesel fuel, comes as part of Exxon Mobil’s long-term strategy to help the refinery better compete in Europe’s challenging industry environment, the company said. While European refiners currently are experiencing weak margins and industry-wide losses as a result of excess refining capacity amid diminished demand, Exxon Mobil said its investment for the coker at Antwerp will directly address a shortfall in regional refiners’ capability to convert fuel oil to products such as diesel. Along with a recently completed 130-Mw cogeneration unit and a diesel hydrotreater, the addition of the coker will bring the company’s total investments into the Antwerp complex to more than $2 billion in less than a decade, said Jerry Wascom, incoming president of Exxon Mobil Refining & Supply Co. In line with the company’s projection that trucking and other commercial transportation will sustain Europe’s high demand for diesel in the coming decades, Exxon Mobil said the Antwerp project is the first of several under consideration to further strengthen its strategic European refineries.

T = Technicals on the Stock Chart Are Strong

Exxon Mobil stock has struggled to make significant progress over the past couple of years. However, the stock is currently trading near highs for the year and looks set to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Exxon Mobil is trading above its rising key averages which signal neutral to bullish price action in the near-term.

XOM

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Exxon Mobil options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Exxon Mobil options

16.17%

73%

70%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

August Options

Flat

Average

September Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Decreasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Exxon Mobil’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Exxon Mobil look like and more importantly, how did the markets like these numbers?

2014 Q1

2013 Q4

2013 Q3

2013 Q2

Earnings Growth (Y-O-Y)

-0.94%

-13.18%

-14.35%

-54.55%

Revenue Growth (Y-O-Y)

-1.47%

-16.08%

-2.41%

-16.41%

Earnings Reaction

-0.97%

-1.17%

0.9%

-1.08%

Exxon Mobil has seen decreasing earnings and revenue figures over the last four quarters. From these numbers, the markets have had mixed feelings about Exxon Mobil’s recent earnings announcements.

P = Weak Relative Performance Versus Peers and Sector

How has Exxon Mobil stock done relative to its peers, BP (NYSE:BP), Chevron (NYSE:CVX), Royal Dutch Shell (NYSE:RDSA), and sector?

Exxon Mobil

BP

Chevron

Royal Dutch Shell

Sector

Year-to-Date Return

1.75%

9.34%

4.98%

15.80%

8.96%

Exxon Mobil has been a poor relative performer, year-to-date.

Conclusion

Exxon Mobil is a provider of essential commodity products and services that people and companies use around the world. The company has reported it will invest $1 billion to install a delayed coker unit at its 320,000-b/d Antwerp, Belgium, refinery. The stock has struggled to make significant progress, but is currently trading near highs for the year. Over the last four quarters, earnings and revenues have been decreasing, which has produced mixed feelings among investors. Relative to its peers and sector, Exxon Mobil has been a poor year-to-date performer. WAIT AND SEE what Exxon Mobil does this quarter.

Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.

More From Wall St. Cheat Sheet: