Exxon Mobil Corporation (XOM) earnings blew past Wall Street’s earnings target thanks to strong results from the chemicals business and cost cuts.
That should not only keep XOM stock on its enviable year-to-date run, but it could be the beginning of a market-beating run over the next decade.
Exxon Q1 Earnings
For the most recent quarter, Exxon Mobil said profits fell 63% to $1.8 billion. Adjusted earnings came to 43 cents a share, but analysts polled by Thomson Reuters expected per-share income of just 31 cents. That’s a big earnings beat.
XOM revenue also topped Street estimates, falling to $48.71 billion when analysts’ were looking for $48.14 billion.
Below the top-line figures, oil equivalent production increased 1.8% over last year’s first quarter, while capital and exploration expenditures fell by a third to $5.1 billion. Cash flow from operations and asset sales was $5 billion, including proceeds associated with asset sales of $177 million.
Even though upstream operations recorded a loss of $832 million and downstream earnings fell $761 million, fatter margins in the chemicals segments allowed operating segment income to expand by $373 million.
In other investor-friendly news, the oil major returned $3.1 billion to shareholders in the first quarter of 2016.
It was a resilient performance for Exxon Mobil. As CEO Rex W. Tillerson said in a press release:
“The organization continues to respond effectively to challenging industry conditions, capturing enhancements to operational performance and creating margin uplift despite low prices. The scale and integrated nature of our cash flow provide competitive advantage and support consistent strategy execution.”
XOM Stock Still Not It’s Own Boss
Exxon is still very at the mercy of macroeconomic conditions, but the quarterly performance should help support this year’s solid showing by XOM stock. Shares are now up nearly 14% for the year-to-date, while the S&P 500 is up less than 2%. Heck, Exxon Mobil is actually slightly positive over the last 52 weeks, which is no small feat for an energy sector name.
Just don’t get carried away yet.
Oil prices are rising for a second consecutive month. And sure, if oil prices continue their recent trend, XOM should have more upside from here … but that’s a big “if.” It’s difficult to have confidence that crude has really stabilized. A weaker dollar is driving prices up these days, not an increase in demand.
And don’t forget: If crude prices get high enough, it’ll just spur some drillers to start pumping again, adding to the supply problem.
Wall Street isn’t expecting much relief. Analysts’ average price target of $82-and-change implies upside of less only 7.6% in the next 12 months, so it’s not like energy-price headwinds are forecast to abate much.
Still, if you were going to bet on one oil stock under current conditions, you could do worse than Exxon Mobil stock. It’s a Dividend Aristocrat that has been through cyclical cycle after cyclical cycle.
There’s no telling how XOM stock ultimately performs this year, but it’s off to a good start.
And in five to 10 years from now? Chances are good we’ll look back at a market-beater.
As of this writing, Dan Burrows did hold a position in any of the aforementioned securities.
