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.
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.
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:
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:
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:
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.
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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