Exxon Mobil (XOM) shares have made quite a run in the past several weeks and now trade very close to 52-week highs of $92.50 per share. This stock was trading at about $77 per share in June, and it is also now trading well above the 200-day moving average, which is around $84 per share. Furthermore, thanks to a big jump in the stock price, the shares now yield just about 2.5%.
Exxon Mobil is one of the world's largest companies in terms of both revenues and market capitalization. For many years, it has been a blue chip oil stock for energy and income investors. However, with the stock trading at lofty levels, investors should consider that it might be a good time to take profits and wait for a pullback. Exxon Mobil increased its exposure to natural gas a few years ago, and this decision does not appear to be paying off for the company, as natural gas prices remain weak.
This exposure to natural gas was partially responsible for an earnings miss when Exxon Mobil reported second quarter earnings. During the quarter, the company benefited from a gain related to the sale of a stake in a refining and chemicals business; however, when those one-time gains are excluded, the company earned $8.4 billion, or $1.80 per share, while analysts' average forecast was $1.95 per share. One article sums up the earnings miss and points out how much exposure Exxon Mobil has to natural gas, it states:
"The company is the nation's largest producer of natural gas, but Chief Executive Officer Rex Tillerson warned last month that prices were too low to allow the industry to cover the cost of finding and producing new supply. "We are all losing our shirts today," Tillerson said at the time."
While many investors think of companies like Chesapeake Energy Corp. (CHK) when they think of natural gas, Exxon is an even bigger player. Some analysts believe that a company like Chevron (CVX) or Exxon could find Chesapeake assets or the entire company to be an attractive target because of a desire to buy natural gas assets before a full rebound occurs in prices. However, Exxon might already have its fill of natural gas exposure, which could make a deal less likely.
Exxon Mobil is expected to report third quarter earnings in late October, and another earnings miss could create a meaningful pullback in the stock, especially if it is still trading near 52-week highs. Another factor to consider is that the shares now trade beyond some analyst price targets. For example, on July 27, 2012, analysts at UBS (UBS) downgraded the stock to neutral (from buy) and kept the price target at $90 per share. This could be another sign that the shares are topping out and might have limited upside.
Cautious investors and traders might want to take some profits and wait for better buying opportunities, which could be coming in the near future.
Here are some key points for XOM:
Current share price: $91.65
The 52 week range is $67.93 to $92.50
Earnings estimates for 2012: $7.60 per share
Earnings estimates for 2013: $8.16 per share
Annual dividend: about $2.28 per share which yields about 2.5%
Here are some key points for CHK:
Current share price: $20.05
The 52 week range is $13.32 to $31.26
Earnings estimates for 2012: 45 cents per share
Earnings estimates for 2013: $1.32 per share
Annual dividend: 35 cents per share which yields about 1.7%
Here are some key points for CVX:
Current share price: $116.42
The 52 week range is $67.93 to $92.50
Earnings estimates for 2012: $12.91 per share
Earnings estimates for 2013: $12.49 per share
Annual dividend: $3.60 per share which yields about 3.1%
Data is sourced from Yahoo Finance.
Disclaimer: No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.