Is Exxon Mobil Enticing After Recent Headlines?

With shares of Exxon Mobil (NYSE:XOM) trading around $94, 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.

On Monday, a Vietnamese newspaper — Thanh Nien — reported that the world’s largest energy company, Exxon Mobil, plans on investing $20 billion in a gas-fired power complex along with Vietnam’s state-owned oil and gas company, PetroVietnam. The two companies will build two power plants with a capacity to generate 6,000-6,500 megawatts of power. While the news has not yet been confirmed by Exxon Mobil itself, we learned the same day that the company sold $5.5 billion in senior notes, which is a big deal considering that the company only has $22.7 billion in debt outstanding.

T = Technicals on the Stock Chart Are Mixed

Exxon Mobil stock has struggled to make significant progress over the past couple of years. The stock is currently trading sideways and may need time to stabilize. 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 rising 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

16.74%

0%

0%

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

Put IV Skew

Call IV Skew

April Options

Average

Average

May Options

Average

Average

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

2013 Q4

2013 Q3

2013 Q2

2013 Q1

Earnings Growth (Y-O-Y)

-13.18%

-14.35%

-54.55%

6.00%

Revenue Growth (Y-O-Y)

-16.08%

-2.41%

-16.41%

-12.29%

Earnings Reaction

-1.17%

0.90%

-1.08%

-1.52%

Exxon Mobil has seen decreasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with Exxon Mobil’s recent earnings announcements.

P = Average 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

-6.30%

-1.83%

-6.88%

1.40%

-2.40%

Exxon Mobil has been an average performer, year-to-date.

Conclusion

Exxon Mobil is a provider of essential commodity products and services that people and companies use around the world. A Vietnamese newspaper reported that Exxon Mobil plans on investing $20 billion in a gas-fired power complex along with Vietnam’s state-owned oil and gas company. The stock has struggled to make significant progress and is currently trading sideways. Over the last four quarters, earnings and revenues have been decreasing. However, investors have been pleased with recent earnings announcements. Relative to its peers and sector, Exxon Mobil has been an average year-to-date performer. WAIT AND SEE what Exxon Mobil does this quarter.

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