Earnings Scorecard: Exxon Mobil (XOM)

Though Exxon Mobil Corp. (XOM) posted strong results in the second quarter, its stock performance was not so impressive. The company’s share price has dropped approximately 11% year to date. While we believe the stock will perform in line with its peers and the S&P 500 over near to medium term, investors will have to wait to see results of XTO Energy integration.

Exxon completed the XTO merger in late June. With the entire business of XTO Energy now on Exxon’s board, the long-term growth outlook of the oil giant is more vivid on the back of solid access to unconventional resources.

Earnings Review

Net income from operations in the second-quarter was $1.60 per share, compared with the Zacks Consensus Estimate of $1.46 and year-earlier earnings of 84 cents.

Total revenue in the quarter increased more than 24% year-over-year to $92.5 billion, but fell short of the Zacks Consensus Estimate of $100 billion.

We have discussed the quarterly results at length here: ExxonMobil Net Nearly Doubles

Agreement of Analysts

The overall trend in annual estimates remains positive, with 9 of 18 analysts covering the stock raised projections for 2010 in the last month, while 4 moved in the opposite direction. No movements were witnessed in the last 7 days. For 2011, 6 of 18 analysts covering the stock moved upwards in the last 30 days, while 5 reduced expectations. However, we noticed no movements in the last 7 days.

Magnitude of Estimate Revisions

Given the positive tone of the revisions, the Zacks Consensus Estimate for fiscal 2010 increased 4 cents over the last month. However, earnings estimates for fiscal 2011 decreased 17 cents over the same period, though it remained flat with week-ago estimates. The current Zacks Consensus Estimate is currently pegged at $5.78 and $6.61 for 2010 and 2011, respectively.

Neutral Rating Maintained

Given Exxon’s significant share in the upstream business (accounting for roughly 74% of first half 2010 net income); we believe that it will retain its leverage to higher oil prices going forward.

With the XTO deal now complete, Exxon has access to significant unconventional resources and is getting a major handle on North America’s newest energy discoveries, as it looks forward to the growth of natural gas in expanding its share of the world’s largest energy market.

While management is focused on delivering superior long-term financial performance, we believe investors will be concerned about the lackluster liquids production profile. In the first-half of 2010, liquids production was lower compared with the year-ago period.

ExxonMobil is the best-run integrated oil company in the world given its track record of superior return on capital employed. It remains to see how Exxon maintains this trend following the completion of XTO merger. Till then, we maintain our short-term Zacks #3 Rank (Hold) rating and a long-term Neutral recommendation.

EXXON MOBIL CRP (XOM): Free Stock Analysis Report

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