Does Exxon Mobil Support Higher Prices?

With shares of Exxon Mobil (NYSE:XOM) trading around $88, 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, including olefins, aromatics, polyethylene and polypropylene plastics, and a range of specialty products. The company has a number of divisions and affiliates with names that include ExxonMobil, Exxon, Esso, or Mobil that operate or market products in the United States and other countries of the world. Exxon Mobil’s principal business is energy, involving 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.

ExxonMobil has brought a lawsuit against FX Networks LLC and its studio affiliates to disallow their use of a logo the oil firm says infringes on its interlocking XX logo. David Beck, ExxonMobil’s attorney, said in Thursday filing in federal court in Houston that, “ExxonMobil has invested many millions of dollars for more than four decades in advertising and promoting” the logo. FX Networks and its studio affiliates kicked off the FXX TV network in September with a logo sporting an interlocking XX design, according to the complaint.

T = Technicals on the Stock Chart Are Mixed

Exxon Mobil stock has remained in a range over the last several years. The stock is currently bouncing off of lows for the year so it may continue to test higher prices. 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 between its key averages, which signal neutral 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

16.20%

20%

19%

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

Put IV Skew

Call IV Skew

November Options

Flat

Average

December 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 minimal 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 Mixed 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?

2013 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)

-54.55%

6.00%

11.33%

-1.88%

Revenue Growth (Y-O-Y)

-16.41%

-12.29%

-5.29%

-7.68%

Earnings Reaction

-1.08%

-1.52%

0.07%

0.47%

Exxon Mobil has seen mixed earnings and decreasing revenue figures over the last four quarters. From these numbers, the markets have had conflicting 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

2.45%

4.72%

11.85%

-0.99%

4.17%

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 recently engaged in a lawsuit with FX Networks. The stock has been trading sideways for a couple of years but is currently bouncing off of lows for the year. Over the last four quarters, earnings have been mixed while revenues have been decreasing which has produced conflicting feelings about the company. Relative to its peers and sector, Exxon Mobil has been a weak year-to-date performer. WAIT AND SEE what Exxon Mobil does after its upcoming earnings release.

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