Exxon Mobil's Record Profit: How Much Is Too Much? 19 comments
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A record profit for Exxon Mobil (XOM), but nonetheless an increase year-over-year that was smaller than expected by analysts. Smaller?!? The company made just shy of $11.7Billion in profit on $138Billion in Revenue. Both all-time highs, not only for Exxon but for any company in America's history!
And nonetheless the Street is not impressed. Granted the incredible spike in Oil Prices have driven most of the revenue upside, resulting in 40% year-over-year growth in the top line. Profit grew 14% ($2.22/share vs. $183/share last year) from the lasting effects of record high oil. Analysts were expecting $2.52/share for the quarter, however, to put things slightly in perspective; Exxon could buy Ford (F) outright from this quarter's profit alone, or it could almost buy General Motors (GM) twice over. The sheer size of Exxon makes it an intriguing Investment, and one that shouldn't be unjustly punished by the market for breaking records.
Granted, a stock like this, with a market cap of $430Billion, isn't going to blow any doors off in terms of dramatic stock price growth; however, there isn't a more profitable company out there these days, and eventually all that cash is going to earn more in simple Interest than most companies through Operations. There are problems within Exxon, that's without a doubt, as most of the earnings increase came solely from the spike in Oil Prices (What happens when oil fully stabilizes?). The refining arm of the company saw dramatic margin degradation due to expansion in oil prices, but it is only natural when the upstream business expands, the downstream business will contract.
There's chances for money to be made here and Exxon in the low 80s is a comfortable buy. Oh, and the company is also buying back a further $8Billion in stock, and it yields about 2%, and should be in a PE range of approximately 10-12 currently. Did I mention almost $12Billion in quarterly profit?! No wonder a major election issue in the US is Taxing Big Oil.
Disclosure: Author holds no position in XOM
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This article has 19 comments:
they were the biggest and would have the biggest profit, naturally.
Shamefully, the U.S. government does not get ExxonMobil to teach
them how to make profits or at least to break even.
If you want to see excessive profits, go back and look at all the money banks made before the bust; now that's criminally excessive.
When you disincent human endeavor, you are one dangerous moment away from collapse of Western (and all) civilization.
Besides, we need big oil to make as much money as possible so that they can pay outrageous premiums on the disruptive energy technology companies. And put away your conspiracy theory hat now. They WILL NOT buy these companies/technologies and bury them. There is a phrase. It goes. You cannot put toothpaste back in the tube.
if you want to see excess profits look @ MSFT.
> jack
I'm afraid bad planning since the first oil shock in the 1970's means we will have more socialism in the near future. All these people have build homes in suburban communites that may or may not be sustainable in the near future. They don't have the resources to dig themselves out and retool the economy, it will mean more government socialism to deal with housing and social issues or rising crime and social unrest. If energy is going to be too expensive for people to afford long commutes, or even cars, and their own homes, then it will mean the will be a need for massive public housing for millions because it probably won't be profitable if at all for private investors to build massive housing projects, and highrise apartments in urban areas based on people's current incomes. It could be a real mess, we need some social and government planning here to avoid a real catastrophy.
On a worldwide basis, in the 2nd 2008 quarter, ExxonMobil paid over $10 billion in corporate income taxes in the second quarter alone, $9.5 billion in sales taxes, and over $12 billion in other taxes.
In other words, ExxonMobil paid (or at least collected) $32.361 billion in taxes in the second quarter. Or to look at it another way - Exxon paid (or collected) almost $3 in taxes ($32.361 billion) for every $1 in profits ($11.68 billion).
That means that for every dollar in Exxon sales – not profits, SALES -- 23.4 cents is for taxes. And that is averaged over all types of sales – not just gasoline.
If the government chooses to nationalize Exxon (and the other oil companies) and take all their profit (reducing the stocks to zero value -- devastating pension funds nationwide), and if we make the outlandish assumption that a government oil company will run as efficiently as Exxon runs now, the price of $4 gas would drop all of 34 cents a gallon. Meantime, government taxes exceed 94 cents a gallon.
For those who wish to verify Exxon taxes, here's a URL for the company's quarterly earnings statement:
tinyurl.com/5rnmyc
Security, and getting out of the Middle East. (Win! Win! Win! Win)
Drill in ANWAR. It's the size of South Carolina and the oil is located within the size and space of Dallas airport. This will create jobs and replace Saudi oil.
Drill off the Atlantic, Pacific, and Gulf coasts, and parts of the Mid-west for Oil. There's enough oil to last a life time or 2. It can also replace most, if not all of our Mid-East oil needs.
Mine for Coal in the American West. There's enough coal to last at
least 200 years or more.
Build train tracks, if they don't already exist, into Detroit and Pittsburgh. Train in all the Oil and Coal for processing and refining. This will replace the old Auto & Steel jobs lost since the 70's.
Overall, this plan does several things:
Once the announcement is made, the price of Oil and Coal will drop due to the impending new large supply that will be brought to market. The drop in food and gas prices will soon follow. It may be a few years before we can start to get the oil and gas into our cars, but the impact on the speculators, that drive the price up today, will start to subside. I'd expect the price to drop by at least 40% within a year.
We can stop the production of Ethanol. This will also bring down the
price of food, since food and fuel will no longer be a competing resource.
Then there's the creation of new jobs. We'll have new jobs for
driller, suppliers of drillers, cargo haulers (tankers, trains, and
truckers) and their suppliers, jobs for processing and refining, and
their suppliers, etc.
It will also greatly reduce our need for foreign imports and maybe if
we can produce enough we can export some?
With the profits made companies they can build and support their own infrastructures.
With the existing tax levels we have in place on the companies, we can target existing government programs like Social Security
This will also give us time to work out our GREEN issues with
Bio-fuels, Nuclear, Algae, Wind & Water Turbine, cow farts, or
whatever else we can think of.
Finally, this may also be a deturnat to Terrorism, since we'll be out
of the Middle East influence game.
Well, this is what I think. What do you think? Who's with me!
first published: Thu May 8, 2008 4:16 pm