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Exxon: Is The Bottom In?

May 04, 2018 11:16 AM ETExxon Mobil Corporation (XOM)71 Comments
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Oleum Research


  • Oil major posted mixed Q1 2018 results, forcing XOM investors to rush to the exit.
  • Declining throughput and weak downstream performance overtook upstream earnings boost.
  • Recent correction offers an interesting entry point for long-term buyers.
  • In the short term, however, weakening investor sentiment may persist amid low Q2 seasonal output.

U.S. Oil and Gas giant, Exxon Mobil Corporation (NYSE:XOM), published mixed Q1 2018 results last week, missing analyst EPS estimates by $0.01 to $1.09 per share. With crude oil prices reaching higher highs and supply glut steadily diminishing, XOM pursues its investment growth and portfolio strengthening. The market is not prone to back management's long-term strategy after the recent sell-off in the share price and the mixed earnings release. Although XOM’s oil throughput and downstream revenues declined, the company’s resilience and its solid capital expenditures of $50 billion until 2025 will deliver robust growth in the coming years.

From a technical standpoint, XOM rebounded sharply from its solid $70 support level following the Q4 2017 earnings release punishment. At current trading levels and with oil near $80 per barrel, reserved Q1 2018 results represent an opportunity to acquire the biggest integrated U.S. Oil and Gas Company.

Source: Trading View

XOM’s stock plunge seems overdone following mixed Q1 2017 earnings release

XOM’s Q1 2018 earnings per share of $1.09 missed analyst expectations by a tinny penny, while revenue, up 16.2% to $68.2b, came in ahead of expectations. During the quarter, normalized field declines, Papua New Guinea outage of 25mboe/d as a result of March earthquake and slowing refined product demand weakened XOM’s earnings. However, XOM did a much better job at managing the outcome, namely through better cost control, down 4% to $60.9b.

Against this, the recent sell-off seems overdone given the above elements. With top line growth accelerating 2.5% to $68.2b and cash flow from operations posting a two-figure boost of 16.2% to $8.6b, XOM’s cash generation covers integrally its capital expenditures and dividend distribution. Meanwhile, free cash flow reached $5.1b, up 16.2%, in spite of stronger capital expenditures, which rose 16.7% quarter on quarter (qoq) to $4.8b.

Having said

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