Exxon Mobil (XOM) is the world’s largest oil company that is not state run. Over the past decade, XOM stock has seen share price appreciation and consistent dividend payouts that has made it an attractive holding for investors seeking a crude oil stock with solid returns. But recently, there have been some leaks in this energy stock’s platform. In fact, if you own Exxon Mobil stock, it may be time to consider rotating out of your position despite creeping crude oil prices.
Here are five reasons why.
- Exxon Mobil earnings misses. On April 29, Exxon Mobil reported a 38% rise in first-quarter earnings. The oil giant said it earned a profit of $1.33 per share on revenue of $90.3 billion. That’s a whole lot of profit on crude oil, and a whole lot of revenue. However, both XOM earnings and Exxon’s revenue fell well below consensus Wall Street estimates. Those estimates called for a first quarter profit of $1.41 per share on revenue of $96.4 billion. Unfortunately, the latest Exxon earnings miss is not an isolated case. XOM profits have disappointed in three of the last four quarters.
- XOM refining decline. One major area of concern for Exxon Mobil is refining revenues. XOM stock leaders said that downstream earnings in the quarter—a term referring to the process of turning oil into gasoline and other products—were off substantially from a year ago. Exxon’s Revenue in this segment fell $1.1 billion compared with last year, and U.S. refining and marketing actually lost $60 million.
- Exxon Mobil profits lagging the crude oil industry. The recent miss for XOM earnings came as two of its competitors, ConocoPhillips (COP) and Occidental Petroleum (OXY), the third- and fourth-largest crude oil companies, respectively, saw their profits more than double in the quarter. ConocoPhillips faces much of the same refining issues as Exxon Mobil, but COP has managed to boost earnings a lot more in the face of weakness in refining margins. That’s not a good sign for Exxon stock.
- Crude oil prices may not last. One reason why Exxon earnings have been growing — albeit at a slower pace than its rivals COP and OXY — has been due to high crude oil prices. Crude oil prices averaged about $79 a barrel in the first quarter, approximately $3 more than last quarter. In the first quarter of 2009, crude oil prices averaged just $43. If we were to see a contraction in demand for oil, or if prices were to come off their recent highs, it could put pressure on XOM stock going forward.
- Exxon’s lagging price performance. If we look at how well Exxon Mobil stock has fared year to date, we see that the stock is actually down 0.62%. That’s considerably below the integrated oil and gas sectors aggregate gain of 3.62% year to date. Over the last 12 months XOM stock has climbed just 1.65%, well below the industry’s performance of 12.07%.
On the plus side of the equation for Exxon Mobil is the company’s recent dividend increase of 2 cents per share. And while a dividend bump is always welcome, it’s certainly not reason enough to hold XOM stock in the face of the five reasons to sell outlined here.
As of this writing, Jim Woods did not own a position in Exxon Mobil.