With shares of Exxon Mobil Corporation (NYSE:XOM) trading at around $91.45, is XOM an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock's Movement
Exxon Mobil has been one of the steadiest investments throughout the broader market since the 1970s. The current size of the company is nearly incomprehensible.
Savvy investors love Exxon Mobil for many reasons. One simple reason is that its size makes it resilient to market corrections. Will there be downswings? Of course. But those savvy investors are well aware that Exxon Mobil will always bounce back. Therefore, even if the stock gets slammed, it's an opportunity to add to a position. Theoretically, someone could only trade Exxon Mobil through his or her entire trading career and do well. When times are good, there isn't much to do but sit back and enjoy. The 2.80% yield will widen that smile a little more when the stock is appreciating. When times are bad, the only requirement for success is patience and the ability to add to a position. In some cases, there might be a great deal of patience required. However, eventually, that individual's position in the stock will increase, which means even brighter days ahead than during the last run-up. It sounds like a nice life, but very few people have the guts to implement this game plan.
For those who aren't familiar with Exxon Mobil, here are just a few positives:
Profit margin of 10.86% ROE of 28.26% Enormous operating cash flow of $50.48 billion Dividend yield of 2.80% Superb historical stock performance Quality debt management Unfathomable profits Excellent capital allocation Analysts love the stock: 7 Buy, 16 Hold, 1 Sell Trading at only 9 times earnings Resiliency in bear markets Superior technology and planning compared to peers Increasing international demand thanks to emerging markets Developed largest natural gas field in the world 89% of employees approve of CEO Rex W. TillersonWhat more could investors possibly want?
Believe it or not, there are a couple of negatives. One, domestic demand is weak. Two, revenue declined in 2012. Revenue also declined last quarter on a year-over-year basis. Is global demand actually weakening? And what will happen to global markets once Ben Bernanke takes his foot off the gas?
These are concerns, but Exxon Mobil isn't a high-growth technology stock trading at over 100 times earnings. In other words, Exxon Mobil isn't for momentum traders looking to make a quick buck. Exxon Mobil is a long-term investment for those with patience. The point here is that Exxon Mobil is a long-term winner.
The chart below compares fundamentals for Exxon Mobil Corporation, BP plc (NYSE:BP), and Chevron Corporation (NYSE:CVX)
| XOM | BP | CVX | |
| Trailing P/E | 9.28 | 6.05 | 9.19 |
| Forward P/E | 11.08 | 7.45 | 9.74 |
| Profit Margin | 10.86% | 6.05% | 11.89% |
| ROE | 28.26% | 18.32% | 19.47% |
| Operating Cash Flow | 50.48B | 20.96B | 36.14B |
| Dividend Yield | 2.80% | 5.00% | 3.30% |
| Short Position | 1.00% | N/A | 1.00% |
Let's take a look at some more important numbers prior to forming an opinion on this stock.
T = Technicals Are Strong
Exxon Mobil has been a steady performer over the past three years.
| 1 Month | Year-To-Date | 1 Year | 3 Year | |
| XOM | 1.40% | 6.80% | 16.76% | 65.21% |
| BP | -1.04% | 5.82% | 18.17% | 29.00% |
| CVX | -0.54% | 14.24% | 25.85% | 88.13% |
At $91.45, Exxon Mobil is trading above its averages.
| 50-Day SMA | 90.28 |
| 200-Day SMA | 89.24 |
E = Equity to Debt Ratio Is Strong
The debt-to-equity ratio for Exxon Mobil is stronger than the industry average of 0.30.
| Debt-To-Equity | Cash | Long-Term Debt | |
| XOM | 0.08 | 6.21B | 13.41B |
| BP | 0.35 | 28.28B | 46.42B |
| CVX | 0.10 | 19.05B | 14.14B |
E = Earnings Have Been Excellent
Investors who want to see large and steady profits head straight to Exxon Mobil.
| Fiscal Year | 2008 | 2009 | 2010 | 2011 | 2012 |
| Revenue ($) in millions | 477,359 | 310,586 | 383,221 | 486,429 | 482,295 |
| Diluted EPS ($) | 8.69 | 3.98 | 6.22 | 8.42 | 9.70 |
Looking at the last quarter on a year-over-year basis, revenue declined and earnings improved.
| Quarter | Mar. 31, 2012 | Jun. 30, 2012 | Sep. 30, 2012 | Dec. 31, 2012 | Mar. 31, 2013 |
| Revenue ($) in millions | 124,053 | 127,363 | 115,710 | 115,173 | 108,807 |
| Diluted EPS ($) | 2.00 | 3.41 | 2.09 | 2.20 | 2.12 |
Now let's take a look at the next page for the Trends and Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?
Conclusion
This article has been heavy on optimism, but please keep in mind that this pertains to the long haul. A deflationary environment is a possibility in the coming years. If this type of environment presents itself, then Exxon Mobil will have to deal with some challenging times. However, as hinted at several times earlier, Exxon Mobil is a long-term OUTPERFORM.
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