Simple Stock Analysis – Exxon Mobil Corporation (XOM)

   

Simple Stock Analysis – Exxon Mobil Corporation (XOM) (1)Summer is here! That means people are going to travel. That means people are going to use their cars and airlines are going to use their planes. That means they all must buy fuel. But fuel prices rise in the summer right? Well I haven’t noticed that too much, at least when looking up my next simple stock analysis of Exxon Mobil Corporation – XOM. As always, please note that I do not consider myself an expert stock picker, do not have any formal investments training and am just doing this for fun and to learn. Oh and I don’t directly own any XOM stock or have any influence with the company either.

 

 

Brief History of XOM

 

XOM is about 135 years old and started out in the name of the Standard Oil Company with John D. Rockefeller.  It went through some rocky years and broke into many other oil companies and this actually allowed Rockefeller’s fortune to increase significantly.  After going through some name changes like Enco and Esso, and Humble and going through some complex legal battles, it settled on Exxon. The name Exxon was derived from a computer program was used to come up with the name Exxon to not match any other name in the world. Now fast forward to January of 1978 when the company now known as Exxon Mobil went public. It started paying a dividend in 1987; still does today; and has gone thru four stock splits.  In 1999, Exxon and Mobil merged to become the largest private oil company in the world.

 

 

XOM Financials

 

In reviewing the quarterly report known as the 10Q filed on 4/28/17, I noted the following:

 

  • Current ratio is .808 (43,131/53,374) in millions – should be 1 or more to indicate the company is able to pay its liabilities when due.
  • Return on Equity as per Yahoo Finance is 5.90%. This is not a high ROE as a good company would have one that is around 20%.

 

 

The net income has risen significantly by ~$2,200M from March 2016 to March 2017 (three months ending). It looks like sales revenue is the big factor here: see chart below (click to expand) where the sales increased from $47,105M to $61,090M.

simplemoneyman.com

 

 

Per XOM’s press release, the increase in revenue was due to “an increase in commodity prices and highlights our continued focus on controlling costs and operating efficiently.” It sounds like a pretty canned response, but nevertheless the increase is significant. This increase in revenue and positive quarter did give the stock price a little bit of a jump. As you can see it went up by a couple of dollars after the earnings press release on April 28, 2017:

simplemoneyman.com

 

 

 

XOM in the News

 

Back in June, the Emir of Qatar, Sheikh Tamim bin Hamad Al-Thani met with XOM’s CEO. They discussed cooperation relations. For more than 10 years, Exxon and Qatar have had worked together so that Qatar could become the biggest liquefied natural gas supporter. In other news, XOM announced in its May shareholder meeting researched that is being done regarding algal biofuels to combat climate change. The large majority of the participants in the meeting want more research to be performed to analyze this problem and its effect on XOM. The algal biofuels project is a $600 million collaboration with Synthetic Genetics Inc. Apart from this, the general news that XOM is holding its price (hovering around $80) relatively flat despite the crude oil price which has dropped from around $49 to $44 per barrel.  When compared with a crude oil related ETF (USO) below, we can see that XOM is less volatile and this may be attributed to its other businesses:

simplemoneyman.com

 

XOM – Buy or Sell?

 

XOM is the largest oil company in its class with a market capitalization of about $345B. The next in line is Shell Company (RDS.A) with 211.80B – a huge difference. In the past five years, XOM has performed better than RDS.A via the chart below and is currently about 20% higher:

 simplemoneyman.com

 

To make things more interesting, XOM’s dividend is 3.78 (amounting to an annual payout of about $3 per share), while RDS.A is a whopping 7.20! It actually offers the highest dividend in oil and gas stocks as reported by Dividend.com.

 

 simplemoneyman.com

 

 

But at the same time, RDS.A just started paying a dividend in 2014. XOM has been paying or rather increasing its dividend for the past 34 years.  It’s a great income stock to hold and has a proven track record to deliver.  And apart from its size and consistent dividend (which are great reasons anyway), another mentioned by Motley Fool is diversification – oh yes major key word for investors. They say that it has operations in drilling (both on and off-shore). But it also mentioned that in 2015 when it’s drilling operations suffered, the company overall was not affected much because of its other operations which “saw earnings more than double, benefiting from the lower oil prices improving the company’s refining margins.”

 

 



So folks, do you get your gas from Exxon? If so, is it because of the prices, convenience to your home or work, or because you like Exxon as a company?

 

 

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I use Personal Capital because (1) it’s free, (2) it tracks all of my accounts and overall net worth, (3) my account balances automatically update, (4) it shows how my investments are diversified and allocated in various sectors, and (5) can use built-in tools like “Investment Checkup” to get….wait for it…free personalized advice!

 

 

 

 

 

Simple Money Man (SMM)

6 Comments

  1. Nice Analysis, what do you think , how will the QATAR troubles affect Exxon in the future?

    • They are a big enough organization, that my estimate is it will not take much affect. Also based on their other product lines as mentioned it would be surprising to see their margins significantly disturbed. Thanks for dropping by!

  2. NIce post SMM. We use Exxon, mostly for the convenience, but also because we are shareholders ( why not support the companies you own if you can!). We purchased shares of XOM about a year ago because we like the dividend it pays and for the most part is a relatively safe stock. Yes, the dip in oil prices hurts, but XOM has been able to weather the storm with its diversified product portfolio. Thanks for the analysis!

    • I use it as well, because for some reason (maybe it’s location too), the one close to my home has better gas prices than other gas stations in town. It’s definitely a solid and mature company and I’m glad the investment has worked out for you 🙂

  3. I have to admit that I lean towards Shell but that’s mainly because I’m a shareholder. I was trying to decide between the two last year and went with Shell and have been happy so far. But XOM was definitely tempting.

    • That’s great. Do you have stock of shell as part of a larger fund? I don’t know if either company has a very meaningful advantage in the eyes of consumers. We mainly purchase gas and both price them competitively especially in situations where they are located close to one another.

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