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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.
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.
Wed, Jan. 8, 12:55 PM
- Lebanon again delays its first auction of oil and natural gas licenses in its coastal waters after the government repeatedly failed to vote on decrees needed to start the bidding process.
- The auction will now be held April 10, three months later than scheduled, instead of this Friday.
- Exxon Mobil (XOM), Chevron (CVX), Total (TOT), Statoil (STO), Royal Dutch Shell (RDS.A, RDS.B) and Eni (E) are among 12 firms that prequalified as operators; another 34 firms were short-listed as non-operators.
Wed, Jan. 8, 7:49 AM
- Exxon Mobil (XOM) is moving to capitalize on growing demand in Asia by announcing the expansion of its chemical production facility in Singapore, where new technology will enable it to process crude oil directly into petrochemical products.
- XOM declines to put a price on the facility but industry analysts see the move as an ambitious bet on new technology at a time of industry overcapacity.
- Two-thirds of the world's growth in chemical demand will occur in the Asia-Pacific region, CEO Rex Tillerson says.
- The new technology used at the facility can take certain kinds of crude oil as feedstock for the cracking process without the need for prior refining, which will lowers feedstock costs, saving energy and reducing emissions.
Tue, Jan. 7, 5:23 PM
- Gasoline and diesel futures rose sharply today as frigid temperatures caused refinery shutdowns across the U.S., sparking concerns about refined product supplies.
- The record arctic chill froze pipes and caused air pressure problems for refiners such as Valero (VLO), whose 195K bbl/day refinery in Memphis was said to have had a shutdown because of the weather, and Exxon (XOM), whose 238K bbl/day refinery outside Joliet, Ill., also experienced equipment problems.
- But even as U.S. natural gas demand reached a record for the second day in a row, traders already a starting to send spot prices lower since demand is bound to ease soon.
- ETFs: UNG, UGAZ, GAZ, BOIL, DGAZ, UNL, KOLD, NAGS, GASZ, DCNG.
Thu, Jan. 2, 5:53 PM
- The deepening alliance between Exxon Mobil (XOM) and Rosneft (RNFTF) shows the troubled relationship between the U.S. and Russian governments is no bar to America’s most valuable energy company investing billions in Russia.
- The joint venture expects to start its first Arctic well this year, targeting a deposit that may hold more oil than Norway’s North Sea; it also plans to frack shale fields in Siberia, sink a deepwater well in the Black Sea and build a natural gas export terminal in Russia’s Far East.
- Diplomatic spats are unlikely to derail business relationships with Russia, especially when the country holds the world's largest oil reserves and XOM needs to find new reserves after three straight years of declining output.
Thu, Jan. 2, 11:51 AM
- The giant Kashagan oil field, which was brought to a halt by leaks shortly after start-up last year, is grappling with a bureaucratic "nightmare" on top of its engineering troubles as it strives for commercial production in 2014, according to a Reuters report.
- The scale and complexity of the project, which has cost ~$50B so far, led its partners - which include Exxon (XOM), Shell (RDS.A, RDS.B), Total (TOT) and Eni (E) - away from the traditional single operator command-and-control model, where one of the larger companies takes charge while others provide support and share risks, costs and rewards.
- Commercial production could still be many months away, and engineering difficulties have exposed the weaknesses of the cumbersome administrative structure, which will stay in place until oil is flowing properly.
Dec. 31, 2013, 3:36 PM
- It’s been a fine year for Exxon Mobil (XOM +0.6%), with shares recently hitting 15-month highs and rising 16.5% YTD; a post-Christmas push looks to be a response to XOM’s announced joint venture with Russia's Rosneft (RNFTF) to launch a pilot program to drill horizontal wells and revive old wells in western Siberia.
- XOM is one of the cheapest Dow stocks and while its earnings and revenues dropped this year, it still managed to outperform the industry average.
- XOM predicts a 35% increase in global energy demand by 2040, sparked by more efficient, energy-saving programs and technologies, increased use of natural gas and other less-carbon intensive fuels, and continued development of advanced exploration and production technologies.
Dec. 24, 2013, 2:12 PM
- Energy stocks have underperformed this year, but Merrill Lynch analysts are reasonably positive on the sector for 2014, pointing to some key themes:
- With the price of gas likely to remain in a narrow range next year, the firm says investors should buy high-quality, large resource-based stocks such as COG and RRC.
- The net asset value race is over, and the coming year is about execution, ML says, seeing PXD and WLL as winners here.
- Following 2013's wave of activism, the firm sees gains in HES and OXY.
- Favorable outlooks for E&P budgets could lift oilfield services stocks focused on North America, such as HAL and SLB.
- The ML team sees crude production rising to the highest level since 1989, and pinpoints TSO and VLO as the refiners to benefit the most in 2014 because they're crude-advantaged and have stock-specific catalysts.
- Finally, the firm suggests investors with significant gains in CVX may want to take those and buy XOM for 2014.
Dec. 24, 2013, 8:51 AM
- Imperial Oil (IMO) has told regulators the estimated cost of its long-delayed Mackenzie Valley project has increased more than 40% to at least $20B since its last tally almost seven years ago, and that it has no idea when North American gas markets might turn around to rescue the project from limbo, the Globe and Mail reports.
- IMO is studying the potential for Mackenzie gas to fit into a broader strategy to feed liquefied natural gas export plants on Canada’s west coast, though that could be years off.
- IMO’s partners in the Mackenzie project are Royal Dutch Shell (RDS.A, RDS.B), ConocoPhillips (COP), Exxon Mobil (XOM) and the native-owned Aboriginal Pipeline Group; IMO is controlled by XOM.
Dec. 18, 2013, 6:26 PM
- Anadarko Petroleum's (APC) legal troubles likely haven't tarnished its allure for investors - instead, it has helped make APC $9B cheaper, and more appealing for a buyout, Bloomberg reports.
- APC may be at the top of the list for multinational oil companies seeking purchases to turn around declining production, analysts say; a buyer willing to shell out $40B plus a premium would get a presence in fields where few big energy companies have exposure: the Niobrara formation in Colorado, Texas’ Eagle Ford shale basin, and offshore Africa.
- APC would be an especially good fit for Exxon (XOM) or Chevron (CVX), Oppenheimer's Fadel Gheit says, although it's hard to see how a deal could be serious without a resolution to the Tronox lawsuit, which could leave APC on the hook for as much as $14B in environmental cleanup and health claims.
Dec. 18, 2013, 3:09 PM
- Exxon Mobil (XOM +2.4%) has hit all-time highs this week, and some of its executives are cashing in; in December alone, XOM execs have sold almost as many shares as in all of 2012, reaping $8.3M, according to a WSJ review.
- The biggest individual sale was by Mark Albers, a senior VP and a leading candidate to be XOM's next chief executive, who sold ~8% of his shares for ~$5M.
- It's usually not a surprise when company brass sells shares as a stock reaches new heights, but Albers' sale raises some eyebrows; for executives in the running for the top job, the conventional wisdom is that you don't want to sell shares.
Dec. 18, 2013, 2:26 PM
- Eni (E +0.9%) strikes a deal with Dutch firm GasTerra for long-term natural gas supplies at a lower price, as it renegotiates contract terms with various companies amid weaker demand in Europe.
- Earlier this year, Eni threatened to take GasTerra, in which Shell (RDS.A, RDS.B) and Exxon (XOM) each own a 25% stake, to arbitration over contracts it said made long-term gas supplies unprofitable.
- Eni is in arbitration with Statoil (STO) as it seeks changes to how much it pays for gas, but the outcome isn't expected for many months.
Dec. 18, 2013, 9:57 AM
- Exxon's (XOM) Imperial Oil (IMO) Canadian subsidiary has applied to local regulators for approval to develop a new 135K bbl/day oil sands project in Alberta.
- IMO says a preliminary estimate puts the cost of the Aspen project at ~C$7B ($6.6B); pending approval, it plans to make a final decision on whether to move ahead as soon as 2017 and begin production as early as 2020.
- The project would be XOM's first to use steam-assisted gravity drainage to access up to 1.1B barrels of oil embedded in sand underground.
Dec. 18, 2013, 8:14 AM
- Exxon Mobil (XOM) cuts its stake in Japan's second-biggest refiner, further reducing its downstream presence in the country to focus on its more lucrative upstream business.
- XOM will sell a 10% interest in TonenGeneral Sekiyu to trading house Mitsui as part of TonenGeneral's takeover of a small oil products retailer.
- Japan's refining industry is realigning, with oil firms cutting capacity to offset shrinking demand from a declining population and shifting to technology that's more energy efficient and environmentally friendly.
Dec. 17, 2013, 7:55 AM
- Canadian federal regulators late Monday approved four new applications to export liquefied natural gas, including for proposed Pacific coast terminals backed by Exxon Mobil (XOM), BG Group (BRGYY, BRGXF) and Malaysia's Petronas.
- The four permits issued Monday, for 25 years each, are among nearly a dozen different plans for LNG terminals in British Columbia, none of which has been built yet or even formally committed to by their corporate sponsors.
- The largest project of the four would be XOM's plan, with its Canadian affiliate Imperial Oil (IMO), to export up to 30M metric tons/year of gas, or 4B cf/day, from a terminal to be located near the remote coastal towns of Kitimat or Prince Rupert, B.C.
Dec. 16, 2013, 10:34 AM
- Exxon Mobil (XOM +3.1%) breaks out to multi-week highs after shares are upgraded to Buy from Neutral at Goldman Sachs, which says XOM may be nearing inflection points in production growth and capital intensity.
- Goldman sees respective oil and boe volume growth of 5% and 2.4%, which would mark XOM's first year of organic growth since 2006; while upside risks to capex exist, the firm believes such concerns are well known by investors.
- On longer-term metrics, Goldman thinks XOM shares look inexpensive vs. the company's history on an absolute basis and relative to the S&P 500.
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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