ExxonMobil (NYSE:XOM) reported earnings this morning — as expected, the report was not particularly exciting. I don’t see any reason for you to get involved in this one just yet.
The oil and gas leader earned $2.12 a share on revenues of $108.8 billion. In the year-ago comparable quarter the company earned $2 a share with total revenues of $124.4 billion. Analysts had expected the company to earn $2.05 a share, so it is a slight positive earnings surprise. But the earnings increase was not the result of operations, but rather a huge share buyback. Total oil and gas production fell by 3.5% in the quarter, but the company spent $5.6 billion to reduce its share count by about 5%.
The bright spots in the report were the company chemical and refining operations; lower commodity and raw material costs boosted profits sharply at both divisions. The chemical operation reported a 62% surge in profits while refining profits increased by 72%. But the combined earnings of the two divisions were just $1.6 billion of the total $9.5 billion in the quarter — so the growth at these two segments was not enough to offset the overall weakness of the oil and gas segments.
Management is making an effort to be as shareholder-friendly as possible. Shareholder dividend payouts are now at $0.57 a quarter, up 21% from the level in the second quarter of last year. Adding to the buyback in the recent quarter, Exxon plans to spend an additional $4 billion in the second quarter to buy back stock and further recue the number of shares outstanding. In all, management spent $7.6 billion in the first quarter to pay dividends and buy back stock. Last night the company announced it would increase the payout by 11% to $0.63 a share.
In spite of its efforts to reward stockholders ExxonMobil retains a “D,” or sell, ranking in Portfolio Grader. Revenues were down on the year and the profit gain of 6% was financial, not operational, in nature. Actual earnings were only up 1% year over year — that is not going to move the needle based on earnings momentum and is not likely to send analysts scrambling to increase their estimates for the balance of the year. Operating cash flows actually declined by almost 30% from $19.3 billion to $13.6 billion. I would avoid ExxonMobil until the economy and oil gas prices pick back up and operational profits and cash flow are growing again.
Louis Navellier is the editor of Blue Chip Growth.