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Exxon Mobil Valuation Analysis: Slightly Overvalued
- Going by a DCF analysis, a comparable company analysis, and a historical multiple analysis, Exxon appears to be overvalued based on its fundamentals.
- Given the recent drop in oil prices, the company still trades in line with its historical multiples and a turn above its comps' mean multiple.
- This analysis is meant to be illustrative for potential and current Exxon investors, as I derive a fair value for the company between $80-$84 per share.
- Exxon Mobil is a good long-term investment in a dividend growth stock.
- Exxon Mobil has shown considerable earnings per share surprise in each one of the last three quarters, and according to its historical valuation multiples, the stock is significantly undervalued.
- Exxon Mobil is generating strong cash flows and returns value to its shareholders by stock buyback and increasing dividend payments.
- Dividend Challenger Exxon Mobil yields 2.9% at a price of $95.11 and has a reasonable five-year CAGR of 9.7%. It trades at a discount of 5% to my fair value estimate.
- Along with other energy sector companies, XOM is challenged by a weaker commodity price environment.
- The company's aggressive share buybacks and its dividend commitments are not sufficiently covered by the free cash flow it is generating, which could inhibit future dividend growth.
- Exxon Mobil's shares are down 5% since the beginning of the year.
- Falling oil prices are the main reason why Exxon Mobil has performed poorly lately.
- With higher oil prices, I expect Exxon Mobil's shares to kick into gear.
- The energy company is still undervalued, and a purchase below $100 can make a lot of sense for long-term oriented investors.
Exxon Mobil Corporation, Currently Undervalued And A Strong Buy
- Exxon Mobil Corp., formed through the merger of Exxon and Mobil in late 1999, is the world's largest publicly owned integrated oil company.
- With a relentless pursuit of efficiency via technology and operational improvement, Exxon sets itself apart from other supermajors and has delivered higher returns on capital.
- On October 31, 2014, the company announced third-quarter 2014 earnings of $1.89 per share, up from $1.79 in the prior year's third quarter.
Dividend Zombies: Exxon - YDP Analysis & Fair Value Appraisal (Part 4)
- Dividend Zombies are income equities that have survived more than 100 years with unbroken and undiminished dividend distributions. These are the 8 income machines that can't be killed.
- This part 4 of an 8-part series, evaluates XOM fair value price, technical momentum trends, entry point, and a yield boost while lowering market risk using covered option writing.
- Exxon, at the November 7th close of $96.59 is 16.63% below fair value price for income investors. A soon expected dividend raise will increase the target to $117.55.
What Can We Learn From Exxon Mobil's Q3 Earnings Release?
- Exxon Mobil reported higher third quarter earnings per share thanks to improvements in downstream operations, lower taxes, asset sales, and a share count reduction.
- The company is working on a record 10 start-ups in 2014, with even more projects on tap in coming years.
- At 12 times earnings, a strong yield and buyback program, and dominance in a field that will always be in demand, Exxon Mobil makes for a fine long-term investment.
Exxon Mobil: Well Positioned In Uncertain Environment, But Valuation High
- XOM is ahead of its peers in mega projects delivery.
- The company also doesn’t plan to trim capex in the current commodity prices environment.
- The company is better positioned in the weak oil prices world but valuation remains high.
- Exxon Mobile is one of the few Dividend Aristocrats to pay a yield above 2.5% and trade at a discount to fair value.
- Recent weakness in energy runs counter to a strong demand outlook and continuing monetary stimulus from the developed world.
- Exxon saw a record number of startups this year and may see production ramp up significantly over the next couple of years.
Exxon Mobil Has Great Defense Against A Tumbling Oil Price
- While the market expected earnings per share (EPS) almost 5% lower than last year due to the tumbling oil price, Exxon achieved 5% EPS growth, thus widely beating analysts' estimates.
- Although most oil majors including Exxon derive about 90% of their earnings from their upstream segment, the difference was made by the downstream segment in Q3.
- The article pinpoints the factors that supported Exxon's earnings and thus determines whether Exxon can repeat such a great performance in an environment of falling oil prices in the future.
- Exxon Mobil reported revenues of $107.5 billion and EPS of $1.89.
- Exxon Mobil distributed $5.9 billion to shareholders in Q3 2014.
- I remain with my original conclusion: Due to its good fundamentals and high shareholder distributions Exxon Mobil is attractive at this price.
- XOM reported Q3 '14 EPS of $1.89, which beat analyst consensus estimate of $1.75.
- The improved results were attributed to higher margins and improved operating results in downstream and chemicals.
- If XOM continues to outperform, I have may to revisit my thesis that CVX is more attractive.
Will Exxon Mobil Top The Whisper Number This Quarter?
- The whisper number is $1.73, in line with the analysts' estimate.
- Exxon has a 51% positive surprise history (having topped the whisper in 24 of the 47 earnings reports for which we have data).
- The overall average post-earnings price move is "negative" (beat the whisper number and see weakness, miss and see weakness) when the company reports earnings.
Exxon Mobil: Dividend Growth Potential And Current Valuation Are Disconnected
- Owing to stable capital spending trend, XOM can comfortably sustain 8%-10% annual dividend growth in the next few years, with both free cash flow and earnings payout level being steady.
- Current valuation implies a dividend growth rate of slightly less than 6%.
- The stock also trades favorably to global comps after factoring in its growth potential and profitability profile.
- ExxonMobil has several problems which need to be corrected in the next few years.
- The company's production levels have been steadily declining since 2009.
- ExxonMobil is not generating enough free cash flow to finance its enormous share buyback program and dividend commitments.
- ExxonMobil has been taking on debt to finance its dividend and share buybacks.
- Many of ExxonMobil's forward growth projects are in Russia, which the company is pulling out of.
- ExxonMobil has increased its dividend payments for 32 consecutive years.
- See the company's competitive advantages and future growth prospects.
- ExxonMobil's yield on cost in 3 years, 5 years, and 10 years is forecast in this article as well.
With Increased US Oil Production, Buy Exxon Mobil On The Pullback
- Growth of crude production in the United States is set to grow; the US has already matched global rival Saudi Arabia in daily output in 2014.
- Already capitalizing on this trend, Exxon Mobil is set to benefit, as horizontal drilling and hydraulic fracturing technologies become more widely used.
- Despite strong earnings results in Q2, Exxon Mobil shares have declined, opening a buying opportunity ahead of Q3 earnings on October 31.
- With a strong outlook and history of beating earnings estimates, we are optimistic on this titan, heading into its next report.
Exxon Mobil: Why You Should Consider This Oil And Gas Champion On The Pullback
- Shares of Exxon Mobil have fallen back to the low $90s as a result of the recent market turbulence.
- Exxon Mobil is a diversified oil and natural gas player with enormous free cash flow strength.
- Exxon Mobil's size and global resource footprint limit downside risk.
- Exxon Mobil might be an interesting investment for investors seeking long-term capital appreciation as well as steady income.
Thu, Jan. 30, 8:59 AM
- ExxonMobil (XOM) -1.4% premarket as Q4 earnings dropped 16% Y/Y as it pumped less crude and natural gas; revenues fell 3.3% Y/Y to $110.86B, below $114.94B analyst consensus estimate.
- E&P operating earnings fell 13% to $6.79B, as production declined 1.8% on an oil-equivalent basis.
- Operating earnings in the refining and marketing business fell 48% to $916M on weaker margins, mainly in refining.
- XOM and Statoil (STO) announce a fifth discovery in Block 2 offshore Tanzania; the discovery of an additional 2T-3T cf of natural gas in place in the Mronge-1 well brings total gas resource estimate to 17T-20T cf.
Thu, Jan. 30, 8:04 AM
Wed, Jan. 29, 3:16 PM
Wed, Jan. 29, 10:17 AM
- BP (BP -0.4%) says production has started at the West Chirag platform of the Azeri-Chirag-Gunashli field in the Azerbaijan sector of the Caspian Sea, which the company calls "a major milestone" in the development of the super-giant ACG field.
- West Chirag production began from a pre-drilled well on Jan. 28 and will increase throughout this year as other pre-drilled wells are brought on line, BP says; the new platform has a capacity for 183K bbl/day with a gas export capacity of 285M cf/day.
- BP is operator of the field with a 35.8% interest; partners in the field include Socar with 11.6%; Chevron (CVX), 11.3%; Inpex, 11%; Statoil (STO), 8.6%; Exxon (XOM), 8%.
Tue, Jan. 28, 4:59 PM
- Big oil's (XOM) push to export U.S. oil overseas is facing a new obstacle: falling gasoline prices.
- A flood of new oil from Texas to the Great Plains has swamped refineries, driving down pump prices 10% since March while global oil prices have hovered at ~$107/bbl; it suggests the world crude market is having waning influence on U.S. gasoline, which instead is beginning to track lower-priced domestic oil.
- As cheaper oil translates to cheaper gasoline, the likes of Exxon (XOM) and Conoco (COP) will have a tougher time convincing U.S. lawmakers that ending export restrictions would benefit the country, says RBN Energy's Sandy Fielden, since "the most obvious thing that’s going to happen [given more exports] is that crude prices will go up and so will gasoline."
- Lifting strict export limits would halt the decline in U.S. crude prices while costing motorists as much as $10B/year in higher fuel prices, according to Barclays.
- ETFs: USO, OIL, UCO, SCO, UGA, DBO, DTO, CRUD, USL, DNO, UWTI, SZO, DWTI, OLO, OLEM, TWTI.
Mon, Jan. 27, 5:58 PM
- Exxon Mobil (XOM) shares have gained 8.2% during the past three months, whipping rivals Chevron (CVX) and ConocoPhillips (COP), but Barclays analysts think that sort of outperformance can't hold up.
- The firm attributes XOM's strong showing to the Buffett effect, the stock’s safe haven status, and the expectation that production has finally bottomed with Q3 marking the inflection point towards higher growth; but due to the recently expired ADCO license in Abu Dhabi and the Dutch government’s decision last week to cut Groningen gas production due to tremor concerns, 2014 likely will result in yet another year of negative production growth.
- As a result, the firm cuts its 2014 EPS forecast to $7.20 from $7.40 but still expect XOM to beat Q4 consensus forecasts of $1.92 by $0.04.
Mon, Jan. 27, 1:54 PM
- Output from the Chevron-led (CVX) consortium at Kazakhstan's huge Tengiz oil field rose to a record 27.1M metric tons last year from 24.2M in 2012.
- CVX holds a 50% in the group, Exxon (XOM) owns 25%, Kazakh state oil company KazMunaiGas 20% and Lukoil (LUKOY, LUKOF) the remaining 5%.
- Results from Tengiz are far more encouraging than the country's Kashagan field, the world's biggest oil find in decades, which was launched in September but halted in October after leaks were detected in a gas pipeline running from the deposit.
Tue, Jan. 21, 9:48 AM
- Exxon Mobil (XOM -0.5%) is downgraded to Neutral from Buy with a $106 price target, down from $110, at BofA Merrill Lynch due to valuation and potential losses of production "largely outside of XOM's control" at Groningen and UAE.
- The combined loss of ~190K boe/day essentially wipes out planned growth of ~4% in 2014; while the impact on earnings is modest, reassessing XOM's broader portfolio leads the firm to raise the issue of a potentially higher government take at XOM's RasGas development as a consequence of higher oil prices in recent years.
Fri, Jan. 17, 5:43 PM
- Operators of Kazakhstan's huge Kashagan oil field reportedly are considering a temporary solution to resume output, halted indefinitely since mid-October after a series of dangerous gas leaks.
- Exxon Mobil (XOM), Shell (RDS.A, RDS.B) and other members of the NCOC consortium are looking into a makeshift solution that would involve re-injecting the gas into the ground; although it could take several months to install the necessary compressors at the $50B project, the plan would help NCOC to minimize revenue losses while figuring out a permanent solution.
- The consortium had planned to rely on gas re-injection - often used in the industry to manage pressure inside underground reservoirs and enhance oil recovery - only in a later stage of the Kashagan project.
Wed, Jan. 15, 6:15 PM
- Alaska plans to jump-start a $45B natural gas export project by pitching in more than 10% of the cost and joining Exxon Mobil (XOM), BP, ConocoPhillips (COP) and TransCanada (TRP) as an equity partner.
- The agreement between the state and the four companies outlines a framework in which Alaska would take as much as a 25% stake in a proposed gas processing plant, an 800-mile pipeline from the North Slope and a liquefaction facility in the Kenai Peninsula.
- The state would pay as much as $5.75B for its share of the $23B liquefaction facility, which would be capable of shipping 18M metric tons/year of liquefied natural gas; the producers would pay the remaining portion of the $45B total project cost.
- Alaska Gov. Parnell has asked the state's legislature to approve the deal and give state agencies the ability to negotiate shipping and leasing arrangements.
Mon, Jan. 13, 8:15 AM
- Royal Dutch Shell (RDS.A, RDS.B) and Gazprom Neft (OGZPY, GZPFY) begin a drilling campaign to assess the potential of Siberia’s Bazhenov formation, likely one of the world’s largest deposits of shale oil.
- The venture between the two companies has started drilling the first of five horizontal wells over the next two years following three years of study on the prospect.
- The Bazhenov layer, which underlies Siberia’s existing oil fields, has attracted Shell and Exxon (XOM) because it is similar to the Bakken shale in the U.S.; XOM will start a $300M pilot project drilling in a different part of the Bazhenov with Rosneft this year.
Fri, Jan. 10, 6:22 PM
- The U.S. will be energy secure by the end of the decade, Exxon Mobil (XOM) CEO Rex Tillerson tells CNBC: "We're already the world's largest natural gas producer [and] last year crude oil production surpassed levels not seen since the 1980s."
- According to Tillerson, China’s shale reserves likely are larger than those in the U.S. but are difficult to develop; most are buried much deeper than in North America, and many are in remote areas where there is little infrastructure to support their development.
- XOM has partnered with a state oil firm to study to test shale potential in China, but Tillerson says it is in the early stages of evaluation.
Fri, Jan. 10, 5:42 PM
- Alaska is dropping its agreement with Canadian pipeline builder TransCanada (TRP) in a bid to pave a new way forward for a long-hoped for natural gas pipeline.
- Alaska Gov. Parnell says a 2007 law was aimed at advancing a project designed for only one project developer, but the liquefied natural gas project now being pursued involves multiple interests.
- TRP would continue playing a role but under a different commercial agreement that also would include Exxon Mobil (XOM), BP and ConocoPhillips (COP).
Fri, Jan. 10, 2:40 PM
- Chevron's (CVX -1.9%) earnings guidance isn't impressing investors; it expects Q4 profit to be "comparable" with Q3 when it posted net income of $4.95B, but analyst consensus had estimated Q4 to come in at $5.69B.
- Unlike last year, when CVX’s refining business was a drag on earnings while its upstream business was strong, now refining is providing the boost - good news for Exxon Mobil (XOM +0.1%) and refiners, Morgan Stanley says.
- MS thinks most U.S. refiners will show a Q/Q improvement in capture rates, helping XOM more than CVX due to its significantly more absolute North American refining capacity; marketing margins also are improving sharply, a positive indicator for refiners with retail operations such as Marathon Petroleum (MPC), Tesoro (TSO), Phillips 66 (PSX), Western Refining (WNR) and Delek US (DK).
Thu, Jan. 9, 11:34 AM
- Exxon Mobil (XOM -1.1%) has gained 14% in the past 12 months, and the strong performance prompts Citigroup’s Faisel Kahn to downgrade shares to Neutral from Buy.
- XOM has been rising on expectations for a recovery from a difficult year for production and a record level of refining maintenance that weighed on 2013 earnings, but the firm believes this is now largely priced into the stock.
- However, Citi raises its price targets for XOM, Chevron (CVX -0.7%), ConocoPhillips (COP +0.1%) and Occidental Petroleum (OXY -0.2%) largely based on a reduction of its cost of capital assumptions and the approaching start-up of many large scale upstream projects.
Wed, Jan. 8, 4:49 PM
- Abu Dhabi says it will produce and market crude on its own from its main onshore oil fields after a shared license to run the fields expires later this month.
- State-run Abu Dhabi National Oil will not renew its 75-year oil-production agreement with BP, Exxon Mobil XOM, Royal Dutch Shell (RDS.A, RDS.B), Total (TOT) and others to run the fields, which produce more than half the United Arab Emirates' crude output of 2.8M bbl/day.
- Abu Dhabi also had green-lighted Occidental Petroleum (OXY), China National Petroleum (PTR), Statoil (STO), Rosneft (RNFTF) Japan's Inpex and Korea National Oil to bid.
XOM vs. ETF Alternatives
Exxon Mobil Corporation is engaged in energy, involving 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.
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