Exxon Mobil Corporation

Transcription

1 Grade Earnings Last Earnings Release 10/27/2017 Last Qtr. Actual vs. Est. $0.93 / $0.84 Next Release 11/02/2017 $0.86 Year Ending 12/31/2016 $2.17 Quick Facts Dividend Yield 3.7% 52 Wk High $ Wk Low $76.10 Short Interest 1% of float $ /12/2017 Rated 'SELL' since May 16th, 2015, when it was downgraded from 'HOLD' Year Ending 12/31/2017 $4.27 Market Cap $350.7B Overview Company Scores Poor Fundamental Grades MarketGrader currently has a SELL rating on Exxon Mobil Corporation (XOM), based on a final overall grade of scored by the company's fundamental analysis. scores at the 51st percentile among all 5815 North American equities currently followed by MarketGrader. Our present rating dates to May 16, 2015, when it was downgraded from a HOLD. Relative to the Integrated Oil sub-industry, which is comprised of 27 companies, 's grade of ranks 16th. The industry grade leader is Hess Midstream Partners LP (HESM) with an overall grade of The stock has performed poorly in the last six months in relative terms, up 0.49% compared with the Integrated Oil sub-industry, up 18.63% and the S&P 500 Index, up 9.0%. Please go to pages two and three of this report for a complete breakdown of XOM's fundamental analysis. Price, Rating and Sentiment History - 2 Years 1

2 Growth C Investors Betting on a Turnaround Must Be Cautious as Company's Growth Record is Still Very Weak 's recent jump in quarterly sales was a welcome Market Growth LT F improvement from a recent trend of long term decline. The company booked $58.55 billion in revenue last quarter, 14.07% better than the Market Growth ST B+ $51.33 billion reported a year ago. By comparison, its $ billion in EPS Growth F 12-month trailing revenue represents a 42.51% decline from the comparable period ended three years ago in which the company had Growth Potential C $ billion in total sales. One or two more quarters of improved results will reverse 's top line growth slide and Earnings Momentum B- likely provide a boost to its earnings growth as well. It also reported outstanding profit growth last quarter from the year earlier period, Earnings Surprise D contrasting with a long term decline in full year profits, which we measure over a three year period. It therefore appears that the company is in the process of reversing its long term trend of falling profits. 's Third quarter profit jumped 49.81% to $3.97 billion from $2.65 billion (excluding extraordinary items) reported in the year earlier period; on the other hand, also including its first quarter results, its 12-month trailing net income dropped 62.07% to $13.01 billion from the $34.30 billion it had earned in the 12 months ended three years earlier. The company's margins have been expanding consistently in the last three quarters, especially with an impressive 84.37% average increase in cash flow, operating and net margins during the latest quarter compared to the year ago period. The company's stock had a moderate 0.08% gain after its October 27, 2017 earnings report, which beat the number analysts were expecting by 10.71%. This positive announcement is not enough to reverse its long term negative earnings surprise record, calculated by MarketGrader as the average over the last six quarterly surprises; during this time the company missed analysts' estimates by 4.01%, a poor indicator for the stock. Revenue Qtrly. 09/30/2017 $58.6B Revenue Qtrly. Year Ago $51.3B Revenue 1 Yr. Chg % Revenue 12 Mo. Tr. Latest $222.5B Revenue 12 Mo. Tr. 3Y Ago $387B Revenue 12 Mo. Tr. 3Y Chg. (42.51%) Net Income Qtrly. 09/30/2017 $4B Net Income Qtrly. Year Ago $2.6B Net Income 1 Yr. Chg % Net Income 12 Mo. Tr. Latest $13B Net Income 12 Mo. Tr. 3Y Ago $34.3B Net Income 12 Mo. Tr. 3Y Chg. (62.07%) Value B+ Positive Value Grades Should Be Considered in the Context of a Generally Poor Fundamental Analysis 's shares trade currently at times the Capital Structure A- company's 12-months' earnings per share, more than two times our "optimum" P/E of This ratio is calculated by MarketGrader by P/E Analysis F looking at the last five years' quarterly earnings, in 12-month rolling Price/Book Ratio A+ periods, in order to determine their growth rate. On this account Exxon Mobil Corporation's earnings per share have fallen at an annualized rate Price/Cash Flow Ratio A- of % during this time. Unless the company manages to translate its recent margin gains into much better Profitability grades this growth rate Price/Sales Ratio C is unlikely to improve, putting downward pressure on the stock. The stock's forward P/E of 20.32, based on estimates for the next four Market Value A- quarters, is higher than the S&P 500's forward P/E of but lower than its trailing P/E. The lower multiple investors are paying for its future earnings compared to past earnings reflects how high expectations are for future earnings growth, which run ahead of expectations for the market as a whole. Considering the company's poor overall fundamentals this premium over the S&P appears risky and sets up the stock for a significant fall if future earnings disappoint. 's current market value is only 2.64 times its tangible book value, which excludes intangible assets such as goodwill. This means investors are currently assigning very little value to the company's ongoing business and its future earnings growth. The stock's price to cash flow ratio of 11.76, based on the $7.04 in cash flow per share generated by. in the last four quarters, could be interpreted as investors' unwillingness to pay too much for the company's earnings prospects in light of its overall fundamental weakness. Its shares also trade at 1.58 times trailing 12-month sales, a 56.33% premium to its industry average of Our final value indicator looks at the relationship between the company's current market capitalization and its operating profits after deducting taxes. According to this indicator 's $ billion valuation is reasonable at times its most recent quarterly net income plus depreciation. P/E Ratio 12 Mo. Tr. 09/30/ Optimum P/E Ratio 7.50 Forward P/E Ratio S&P 500 Forward P/E Ratio Price to (Tangible) Book Ratio 2.64 Price-to-Cash Flow Ratio Price/Sales Ratio

3 Profitability D Very Poor Across-the-Board Profitability Indicators Reflect and Underperforming Operation Despite having earned $13.01 billion during the last 12 months, for a Asset Utilization C decent net profit margin of 5.85%, 's profitability indicators are very poor. This is based on a very weak return on equity, Capital Utilization F an important component of our analysis and an operating margin that Operating Margins C trailed the industry average, both also based on 12-month trailing results. The Integrated Oil industry's average operating margin of 12.08% is Relative Margins F 69.13% higher than the company's 5.19% margin. Exxon Mobil Corporation's poor return on equity of 7.14% based on what the company Return on Equity D earned over the last four quarters actually represents an improvement from the return on equity of 5.24% achieved in the 12 months ended a Quality of Revenues D year earlier. This measure is important to MarketGrader in measuring profitability trends over time and the efficiency of company's management. While this improvement is a positive sign for the company's investors, it would be prudent for management to continue to be conservative about the company's leverage as it is now, with total debt currently less than one third of its total equity. Its long term debt accounts for 12.01% of total capital. 's $39.05 billion in twelve month trailing core earnings, or EBITDA, shows a remarkable increase of 33.54% from the twelve months ended a year earlier, in which its core operations generated $29.24 billion. EBITDA is used to measure the company's true earnings power by including interest costs, income taxes, depreciation and amortization, all non-operating charges, which are nevertheless accounted for in several EPS and net income measures of our fundamental analysis. Cash Flow B+ Company's Management of its Cash Flow Appears Very Sound but Could Improve in a Few Areas reported a 40.71% growth in cash flow during Cash Flow Growth A+ the latest quarter to $7.54 billion, an impressive increase from the $5.36 billion in the same period last year. While very healthy, this latest growth EBIDTA Margin B- rate is significantly lower than the 57.62% increase in twelve month Debt/Cash Flow Ratio A+ trailing cash flow compared to the year earlier period, underscoring a slowdown in the company's core operations. This could lead to lower Interest Cov. Capacity A+ earnings expectations and consequently a lower valuation for the stock. The company's net debt --defined as total debt minus cash on hand--of Economic Value D $36.34 billion is only 3.44 times as large as its last quarter's EBITDA of $10.57 billion. This ratio is 33.56% smaller than it was at the end of the Retention Rate B- same quarter a year before, a very significant reduction in its leverage. This affords the company plenty of flexibility in managing its balance sheet to stimulate future growth, pay out a dividend or pursue strategic objectives such as acquisitions. Its cash on hand also fell in the last twelve months to $4.27 billion held at the end of last quarter, a 16.24% drop from the year earlier quarter. It is therefore apparent has been using its cash reserves to deleverage as its total debt as a percentage of total capital was reduced to 18.22% last quarter from 21.29% in the same period a year before. As such, despite having less cash on hand now, the company's liquidity has improved significantly in the last year. Our Economic Value indicator measures how much the company generates in true economic profit by accounting not only for its costs of doing business (operating costs) but also the cost of the capital it employs. Based on its 12-month trailing operating income, 's return on $ billion in invested capital was 5.57%. The total after tax cost of capital, which includes all forms of equity plus long term debt, was 5.13% in the last year. The weighted cost of equity, or 4.94%, was significantly larger than the weighted cost of debt, which was 0.19%. When these costs are deducted from the return described above it results in a very poor economic value added (EVA) of 0.44%. This means 's investors are receiving a mediocre return on the capital they've tied up with the company. The company increased its quarterly common dividend on September 30, 2017 by 2.67%, to $0.770 cents a share from $0.750 cents. It has paid a dividend for at least 40 years and, based on this latest payout, the stock is currently yielding 3.70%. The $12.84 billion spent by Exxon Mobil Corporation in the last 12 months making common dividend payments seems alarming considering it accounted for 42.74% of total cash flow and 98.73% of total after-tax earnings. The fact that this payout ratio is actually slightly lower than the % of earnings spent on dividends in the 12 months ended just a quarter before, combined with the company's poor fundamentals, suggests it might be facing a liquidity squeeze and will need to reduce its payout significantly before it completely undermines its balance sheet. Cash Flow Qtrly. 09/30/2017 $7.5B Cash Flow Qtrly Year Ago $5.4B Cash Flow 1 Yr. Chg % Cash Flow 12 Mo. Tr. Latest $30.1B Cash Flow 12 Mo. Tr. 3Y Ago $47.9B Cash Flow 12 Mo. Tr. 3Y Chg. (37.27%) Free Cash Flow Last Qtr. $2.6B Economic Value Total Invested Capital $222.9B Return on Inv. Capital 5.57% Weighted Cost of Equity 4.94% Weighted Cost of Debt 0.19% Total Cost of Capital 5.13% Economic Value Added 0.44% 3

4 Profile Exxon Mobil Corp. explores, develops and distributes crude oil and natural gas. The company through its divisions and affiliated companies, engages in its principal business, is energy, involving exploration for, and production of, crude oil and natural gas, manufacture of petroleum products and transportation and sale of crude oil, natural gas and petroleum products. It manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics and a variety of specialty products. The company also has interests in electric power generation facilities. It operates business under three segments: Upstream, Downstream and Chemical. The Upstream segment is organized and operates to explore for and produce crude oil and natural gas. The Downstream segment manufactures and sells petroleum products. The refining and supply operations encompasses global network of manufacturing plants, transportation systems, and distribution centers provides fuels, lubricants, and other high-value products and feedstocks to customers. The Chemical segment operates to manufacture and sell petrochemicals. It supplies olefins, polyolefin's, aromatics, and a wide variety of other petrochemicals. The company operates and markets products in the U.S. and most other countries of the world. Exxon Mobil was founded by John D. Rockefeller in 1882 and is headquartered in Irving, TX. Key Facts: 5959 Las Colinas Boulevard Irving,TX Phone: Biggest Company in Sub-Industry Grade Market Cap:$ billion Smallest Company in Sub-Industry PentaNova Energy Corp. Grade 21.9 Market Cap:$73.82 million MarketGrader Dilution Analysis Impact of Change in Shares on EPS - Q Dilution Summary Income Statement Last Qtr (09/2017) 12 Mo. Trailing Revenue $58.6B $222.5B *EPS Latest $0.93 *EPS Year Ago $0.63 EPS Change 1 Yr. 47% C. Shares - Latest(M) 4,271 C. Shares - Yr Ago(M) 4,178 C. Shares - 1Yr Chg. 2% EPS if Yr. Ago Shares $0.95 EPS Chg. if Yr. Ago 50% EPS Loss from Dilution ($0.02) *Earnings per share are based on fully diluted net income per share excluding extrodinary items. This number may not match the headline number reported by the company. Op. Income $3.9B $11.5B Net Income $4.0B $13.0B *EPS $ *Earnings per share are based on fully diluted net income per share excluding extrodinary items. This number may not match the headline number reported by the company. Balance Sheet Total Assets Total Debt Latest $349.4B $40.6B Stockholders Eq. $182.3B All numbers in millions except EPS Ratios Price/Earnings (12 mo. trailing) Price/Tangible Book 2.64 Price/Cash Flow Price/Sales 1.58 Debt/Cash Flow Return on Equity 7.14% Gross Margin (12 mo. trailing) 23.26% Total Assets Intangible Assets $349.4B $48.1B '12 '13 '14 '15 '16 '17 Qtr Operating Margin (12 mo. trailing) 5.19% Net Profit Margin (12 mo. trailing) 5.85% Long Term Debt $24.9B Qtr Total Debt Book Value Enterprise Value $40.6B $182.3B $36.3B Qtr Qtr

5 Top Down Analysis Energy Stocks in Sector: 534 Buys: 67 (12.55%) Holds: 63 (11.80%) Sells: 404 (75.66%) No. of stocks at: 52-Wk. High: 7 52-Wk. Low: 47 Above 50 & 200-day MA: 154 Below 50 & 200-day MA: 239 Integrated Oil Stocks in Sub-Industry: 27 Buys: 3 (11.11%) Holds: 4 (14.81%) Sells: 20 (74.07%) No. of stocks at: 52-Wk. High: 1 52-Wk. Low: 2 Above 50 & 200-day MA: 13 Below 50 & 200-day MA: 6 # Ticker Grade Sentiment Name Price Next EPS 1 NBLX P Noble Midstream Partners LP $ /01/ EQM N EQT Midstream Partners LP $ /01/ RMP N Rice Midstream Partners LP $ /09/ TGS N Transportadora de Gas del Sur SA $ /08/ CRZO N Carrizo Oil & Gas, Inc. $ /27/ PSD.CA N Pulse Seismic Inc. $ /10/ VLP N Valero Energy Partners LP $ /15/ MTDR P Matador Resources Company $ /08/ SRCI N SRC Energy Inc $ /22/ CNNX N CONE Midstream Partners LP $ /03/ XOM 1 P $ /02/2017 # Ticker Grade Sentiment Name Price Next EPS 1 HESM N Hess Midstream Partners LP $ /29/ SBOW N SilverBow Resources Inc $ /27/ GDP N Goodrich Petroleum Corporation $ /21/ SU P Suncor Energy Inc. $ /27/ SNP N China Petroleum & Chemical Corporation $ /23/ SU.CA N Suncor Energy Inc. $ /27/ TOT P Total SA Sponsored ADR Class B $ /30/ RDS.A P Royal Dutch Shell Plc Sponsored ADR $ /01/ RDS.B P Royal Dutch Shell Plc Sponsored ADR $ /01/ EC P Ecopetrol SA Sponsored ADR $ /14/ XOM 1 P $ /02/ Price Trend. A- 2. Price Momentum. D 3. Earnings Guidance. B+ 4. Short Interest. A+ 7.9 Copyright 2010 MarketGrader.com Corp. All rights reserved. Any unauthorized use or disclosure is prohibited. Neither the information nor any opinion expressed constitutes an offer to buy or sell any securities or any options, futures or other derivatives related to such securities ("related investments"). The information herein was obtained from various sources; we do not guarantee its accuracy or completeness. This research report is prepared for general circulation and is circulated for general information only. It does not have regards to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities, if any, may fluctuate and that each security's price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. MarketGrader does not make markets in any of the securities mentioned in this report. MarketGrader does not have any investment banking relationships. MarketGrader and its employees may have long/short positions or holdings in the securities or other related investments of companies mentioned herein. Officers or Directors of MarketGrader.com Corp. are not employees of covered companies. MarketGrader or any of its employees do not own shares equal to one percent or more of the company in this report. 5