There was an unusual amount of anticipation over the fourth-quarter earnings release of Exxon Mobil Corporation (NYSE:XOM). After all its CEO, Rex Tillerson, was recently plucked from the boardroom and made U.S. Secretary of State. There is hope that oil and gas prices may stay over $50 per barrel and, if so, Exxon stock should be making big money.
But it’s not … at least not yet. XOM’s numbers, $1.7 billion in net income and 41 cents per share, badly trailed analyst estimates of 68 cents. But the top-line, $61 billion in revenue, was about a half-billion above those estimates.
For the year, the company earned $7.84 billion, $1.88 per share. This sounds impressive, but it’s less than half of 2015’s $16.15 billion in earnings, and that in turn was half of 2014’s $32.52 billion. The initial response of traders was cautious, with Exxon stock opening only slightly below the previous day’s close of $84.86 per share.
The question for XOM stock investors remains, is this the bottom, and how quick might the turn be?
Exxon Stock Is Hanging In There
The year 2016 was a year that XOM stock had to hang in and tough things out. The earnings release emphasized that cash flow and asset sales covered the dividend of 75 cents per share. The dividend costs the company about $3 billion per quarter, and the quarterly earnings continue to come up short of that mark.
The company has kept earnings positive by cutting back sharply on capital expenditures. It spent $4.83 billion during the fourth quarter, against $7.42 billion a year earlier. For the year, Exxon invested $19.30 billion, against $31.05 billion in 2015.
This has yet to have a big impact on production, which was down just 3%, or 127,000 barrels per day, from 2015’s figures during the fourth quarter, with new volume in Nigeria and Indonesia partly making up for the declining production of U.S. fields. The company lost $2.3 billion producing oil, which it calls “upstream” operations, and $1.2 billion refining and selling it, which it calls “downstream” operations. The profit came from chemicals, $872 million, and finance earnings of $209 million.
XOM Stock: Swing and a Miss
Initial reporting on the release emphasized the earnings miss.
CNBC said the numbers “badly” missed estimates on earnings, and Marketwatch just used the word “miss.” The Nasdaq.com headline emphasized that earnings fell 40% from a year earlier.
However, writers hedged their stories by noting the strength of Exxon stock and pointing out that the shares were already down nearly 6% for 2017, and after an initial fall of a few cents, XOM stock quickly found its footing in pre-market trading, getting above $85 per share. The yield remains fat at 3.5%, so the downside for Exxon stock will be muted.
Better Times Ahead for XOM?
It’s anticipation of bigger things that keeps Exxon stock players coming back. InvestorPlace Feature Writer James Brumley holds out great hope for a deal, which took the Bass family prospects in the Permian Basin back into the fold. XOM stock investors expected an update on Texas production at the company’s earnings conference call.
Despite the recent fall in the Exxon stock price, the 320-day moving average has been rising for over two months with speculators saying it needed to hold $84.55 to maintain the up-trend. That seemed likely.
Analysts continue to hold their breath on XOM stock, with half now sitting in the “hold” camp, one having recently switched off “strong buy” and one having switched off “strong sell.”
The bottom line for Exxon stock is that, if Trump is as good for oil as advertised, the company should be seeing that in results as 2017 unfolds. Or that could be a pie-crust promise — easily made, easily broken.
Dana Blankenhorn is a financial and technology journalist. He is the author of the sci-fi novella Into the Cloud, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he did not hold a position in any of the aforementioned securities.
