Has Exxon Mobil Fallen Out of the Limelight?

With shares of Exxon Mobil Corporation (NYSE:XOM) trading at around $88.07, 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:

C = Catalyst for the Stock’s Movement

Exxon Mobil has been one of the best investments possible since the 1970s. This is a company that has withstood recessions, wild swings in oil prices, the Exxon Valdez disaster, and more. Every time the stock has been punished, it has eventually recovered and made new highs. This is in addition to dividend payments. However, past success doesn’t guarantee future results. Let’s take a look at the current situation.

Positives:

  • Geographically diversified
  • Share repurchasing programs
  • Analysts like the stock: 8 Buy, 15 Hold, 1 Sell
  • Superb capital allocation
  • Constantly aiming to improve operations
  • Stronger ROE than peers
  • Exceptional cash flow
  • Decent yield of 2.60 percent (lower than peers mentioned in this article)
  • More resilient to market corrections than peers mentioned in this article
  • Quality debt management
  • Consistent earnings improvement on annual basis
  • Earnings improvement last quarter on year-over-year basis
  • Improved margins in chemical business
  • New projects in the works (as always)
  • Interested in building strong position in all energy spaces (this way it can’t lose)

Negatives:

  • Decline in revenue in 2012
  • Decline in revenue last quarter on a year-over-year basis
  • Higher operating expenses upstream
  • Lower liquid realizations upstream
  • Upstream earnings declined 9.8 percent year-over-year
  • Lower volume and mix effects downstream
  • Downstream profit down to $1.5 billion from $1.6 billion last year

Let’s get to some comparative numbers. The chart below compares fundamentals for Exxon Mobil, Chevron Corporation (NYSE:CVX), and ConocoPhillips (NYSE:COP). Exxon Mobil has a market cap of $394.59 billion, Chevron has a market cap of $230.23 billion, and ConocoPhillips has a market cap of $71.27 billion.

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XOM

CVX

COP

Trailing   P/E

9.08

8.90

8.68

Forward   P/E

10.73

9.46

9.76

Profit   Margin

10.48%

11.76%

13.97%

ROE

28.69%

20.26%

13.10%

Operating   Cash Flow

$56.17 Billion

$38.81 Billion

  $13.92 Billion

Dividend   Yield

2.60%

3.10%

4.60%

Short   Position

N/A

N/A

1.90%

 

Let’s take a look at some more important numbers prior to forming an opinion on this stock…

E = Equity to Debt Ratio Is Strong

The debt-to-equity ratio for Exxon Mobil is stronger than the industry average of 0.30. Debt management has always been strong at Exxon Mobil.

Debt-To-Equity

Cash

Long-Term Debt

XOM

0.07

$9.58 Billion

$11.58 Billion

CVX

0.09

$21.91 Billion

$12.19 Billion

COP

0.52

$3.62 Billion

$25.31 Billion

 

T = Technicals Are Mixed

Exxon Mobil has performed well over a three-year time frame, but it has underperformed its peers. This is in addition to offering the lowest yield of the three.

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1 Month

Year-To-Date

1 Year

3 Year

XOM

-1.31%

2.46%

4.78%

37.18%

CVX

-2.04%

10.63%

19.12%

58.55%

COP

-4.16%

1.81%

11.69%

48.97%

 

At $88.07, Exxon Mobil is trading below all its averages, but not by much.

50-Day   SMA

88.90

100-Day   SMA

88.91

200-Day   SMA

88.85

 

E = Earnings Have Been Strong                

Earnings have consistently improved on an annual basis since 2010. Exxon Mobil brings in some enormous profits. Revenue had been improving on an annual basis, but there was a setback in 2012. This has been a common trend throughout the broader market, and in this case, it relates more to that global economy than the company itself. Even if revenue were to decline substantially, Exxon Mobil would still be profitable. This was proven in 2009.

2008

2009

2010

2011

2012

Revenue   ($)in   billions

477.36

310.59

383.22

486.43

482.30

Diluted   EPS ($)

8.66

3.98

6.22

8.42

9.70

 

When we look at the previous quarter on a year-over-year basis, we see a decline in revenue and an improvement in earnings.

3/2012

6/2012

9/2012

12/2012

3/2013

Revenue   ($)in   billions

124.05

127.36

115.71

115.71

108.80

Diluted   EPS ($)

2.00

3.41

2.09

2.19

2.12

 

Now let’s take a look at the next page for the Trends and Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?

T = Trends Might Support the Industry

The only reason trends might support the industry is because demand is falling. That may sound simplistic, but it’s also the most important factor. It’s very possible that oil prices will suffer considerably within the next one to two years. However, over the long haul, trends support the industry.

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Conclusion

Exxon Mobil always battles back from negative news hurting its stock price. It’s one of the best-run companies in the world. If the stock ever gets slammed, it might lead to investor frustration, but it should be looked at as a great opportunity. However, patience will be required.

Exxon Mobil is a long-term OUTPERFORM.

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.

Disclosure: All content posted represents my opinion and views and should never be considered professional advice. You should do your own research and consult with a professional financial advisor before making any investment decisions. I am currently short technology, financials, the Russell 2000, and the euro.

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