I have extensively compared the two American oil giants, Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM), in a previous article. Both companies currently trade at a low P/E (9.1) and maintain a very strong balance sheet, with minimum debt and strong distributions to their shareholders. The question is why Chevron has markedly outperformed Exxon in the last two months (+8% vs.-1%).
Both companies reported their full-year results on February 1, and beat the analysts' expectations by a wide margin. The Q4 EPS of Chevron ($3.70) exceeded the expectations by $0.65 while the Q4 EPS of Exxon ($2.20) exceeded the consensus by $0.21. Therefore, Chevron exceeded the expectations by a higher percentage (20% vs. 10%) than Exxon.
Even more important, Chevron was the only oil major that increased its upstream production in Q4-2012 (by 1.1% Y/Y). Moreover, the company projected a 25% growth in its production volume and in its cash flow in the next five years. On the contrary, Exxon reduced its oil production in Q4-2012 by a disappointing 5.2% Y/Y.
As Chevron has markedly outperformed Exxon since their earnings announcement, many investors are tempted to switch the two stocks, i.e., sell Chevron and buy Exxon, trying to maximize their portfolio performance. However, the technical picture is not supportive for this trading action. As I correctly predicted in a previous article, Chevron has broken above $118.5 and has thus recorded new highs, which is a very bullish technical formation. On the other hand, Exxon has been consolidating around its previous high ($88), which makes it possible that the stock exceeds its recent high ($93.7) but is not as strong a formation as Chevron's technical picture.
Conclusively, although both Chevron and Exxon have reported great results, Chevron has markedly outperformed Exxon largely thanks to its superior performance in terms of earnings and production volumes. It should be noted that this is just a continuation of the relative past performance of the two companies. Moreover, as the technical picture is currently very bullish for Chevron, I recommend holding on to this stock.