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Chevron vs. ExxonMobil: Which is Better Ahead of Q3 Earnings?
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Oil prices have undergone resurgence recently with WTI crude closing in on the $52 per barrel mark on more than one occasion. Meanwhile, Brent crude is hovering around the $58 per barrel mark, in yet another sign of better days the commodity. The reasons for this rebound are not hard to seek. The most recent catalyst for gains has been a decline in Iraq’s oil exports, to the tune of 200,000 barrels per day.
OPEC Compliance Triggers Price Rise
But it is greater compliance to the OPEC production controls agreement concluded last November that is triggering the recent upsurge. A high level of compliance to the agreement, which was extended through March 2017, has helped to mop up the oversupply plaguing the oil market for a long time. Additionally, the global economy is enjoying an extended run of gains during a period which is possibly its best in a decade.
Of course, skeptics are quick to characterize the cut in supply as a temporary one. This group of commentators ascribe part of the drop in supply to the refinery shutdowns caused by the recent hurricanes experienced by the United States. Additionally, an increase in prices is likely to trigger the United States’ ultra efficient shale sector to ramp up production, which may lead to a subsequent fall in prices.
Given this backdrop, it may be a good idea to examine which of the two oil supermajors, Chevron Corporation (CVX - Free Report) or Exxon Mobil Corporation (XOM - Free Report) , is better placed ahead of their third quarter earnings releases. Both companies are scheduled to report earnings on Oct 27.
When considering price performance over a six-month period, Exxon has gained 1.8%, lower than the broader industry’s 7.6% increase. On the other hand, Chevron has gained 11.4% over this period, which exceeds both Exxon’s and the broader industry’s performance.
However, over the last one month, Exxon has gained 2.8%, outperforming Chevron and the broader industry which have increased 0.8% and 1.7%, respectively.
Current Ratio
This metric measures the ability of a company to service both short-term and long-term debt. In other words, it is the ratio of the current level of total assets and expresses to that of the current level of liabilities. Here, Chevron is a clear winner with a current ratio of 1.15, which is superior to the industry average of 1.14 as well as Exxon’s reading of 0.84.
Return on Capital
This is an important profitability metric for capital intensive industries such as oil and gas, since it measures profitability with regard to invested capital. Our research shows that the average 12-month ROC for Exxon Mobil is 6.6%, much higher than the industry average of 4.2% and Chevron’s level of 3.3%.
Dividend Yield
In a year's time, the dividend yield for both Exxon Mobil and Chevron was lower than the broader industry. The industry has an average dividend yield of 4.4%, higher than 3.7% for Exxon Mobil and 3.6% for Chevron.
Hence, on a comparable basis, Exxon Mobil shareholders earned a better dividend yield than Chevron.
Valuation
Compared with the S&P 500, the broader industry is undervalued. This implies that the industry has the potential to gain in the near future. The industry has an average one-year EV/EBITDA ratio – one of the best multiples for valuing oil and gas companies because these energy firms have a large amount of debt and EV (Enterprise Value) includes the parameter – of 6.91, which is below the S&P 500 average of 11.63. Hence, it might be a good idea not to stay away from stocks belonging to this industry.
Both Exxon Mobil and Chevron are overvalued compared with the industry. But with an EV/EBITDA ratio of 9.85, Exxon Mobil is clearly cheaper than Chevron, whose value for the metric stands at 10.53.
Earnings History, ESP and Estimate Revisions
Considering a more comprehensive earnings history, both Chevron and Exxon Mobil have delivered positive surprises in three of the trailing four quarters. However, Chevron has a higher average earnings surprise of 19.4% compared to Exxon’s figure of 8.9%.
When considering Earnings ESP, however, Exxon Mobil is the clear winner with an ESP value of +1.78%, clearly superior to Chevron’s value of -6.16%. At the same time, Chevron’s earnings estimate for the current year has increased by 5.1% over the last thirty days, compared to Exxon’s increase of 1.8%.
Conclusion
Our comparative analysis shows that Chevron holds and edge over Exxon when considering price performance over an extended period, liquidity, estimate revisions and average earnings surprise. However, when considering return on capital, dividend yield, EV/EBITDA ratios, price performance in the short term and ESP values, Exxon is clearly the better stock. What clinches the case in favor of Exxon Mobil is its superior ESP value of +1.78%, compared to Chevron’s figure of -6.16%. This is why it may be better to bet on Exxon Mobil over Chevron as they prepare to report earnings later this week.
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It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Chevron vs. ExxonMobil: Which is Better Ahead of Q3 Earnings?
Oil prices have undergone resurgence recently with WTI crude closing in on the $52 per barrel mark on more than one occasion. Meanwhile, Brent crude is hovering around the $58 per barrel mark, in yet another sign of better days the commodity. The reasons for this rebound are not hard to seek. The most recent catalyst for gains has been a decline in Iraq’s oil exports, to the tune of 200,000 barrels per day.
OPEC Compliance Triggers Price Rise
But it is greater compliance to the OPEC production controls agreement concluded last November that is triggering the recent upsurge. A high level of compliance to the agreement, which was extended through March 2017, has helped to mop up the oversupply plaguing the oil market for a long time. Additionally, the global economy is enjoying an extended run of gains during a period which is possibly its best in a decade.
Of course, skeptics are quick to characterize the cut in supply as a temporary one. This group of commentators ascribe part of the drop in supply to the refinery shutdowns caused by the recent hurricanes experienced by the United States. Additionally, an increase in prices is likely to trigger the United States’ ultra efficient shale sector to ramp up production, which may lead to a subsequent fall in prices.
Given this backdrop, it may be a good idea to examine which of the two oil supermajors, Chevron Corporation (CVX - Free Report) or Exxon Mobil Corporation (XOM - Free Report) , is better placed ahead of their third quarter earnings releases. Both companies are scheduled to report earnings on Oct 27.
Other prominent companies scheduled to report earnings this week include Microsoft Corporation (MSFT - Free Report) and Alphabet Inc. (GOOGL - Free Report) . Each of these stocks have a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price Performance
When considering price performance over a six-month period, Exxon has gained 1.8%, lower than the broader industry’s 7.6% increase. On the other hand, Chevron has gained 11.4% over this period, which exceeds both Exxon’s and the broader industry’s performance.
However, over the last one month, Exxon has gained 2.8%, outperforming Chevron and the broader industry which have increased 0.8% and 1.7%, respectively.
Current Ratio
This metric measures the ability of a company to service both short-term and long-term debt. In other words, it is the ratio of the current level of total assets and expresses to that of the current level of liabilities. Here, Chevron is a clear winner with a current ratio of 1.15, which is superior to the industry average of 1.14 as well as Exxon’s reading of 0.84.
Return on Capital
This is an important profitability metric for capital intensive industries such as oil and gas, since it measures profitability with regard to invested capital. Our research shows that the average 12-month ROC for Exxon Mobil is 6.6%, much higher than the industry average of 4.2% and Chevron’s level of 3.3%.
Dividend Yield
In a year's time, the dividend yield for both Exxon Mobil and Chevron was lower than the broader industry. The industry has an average dividend yield of 4.4%, higher than 3.7% for Exxon Mobil and 3.6% for Chevron.
Hence, on a comparable basis, Exxon Mobil shareholders earned a better dividend yield than Chevron.
Valuation
Compared with the S&P 500, the broader industry is undervalued. This implies that the industry has the potential to gain in the near future. The industry has an average one-year EV/EBITDA ratio – one of the best multiples for valuing oil and gas companies because these energy firms have a large amount of debt and EV (Enterprise Value) includes the parameter – of 6.91, which is below the S&P 500 average of 11.63. Hence, it might be a good idea not to stay away from stocks belonging to this industry.
Both Exxon Mobil and Chevron are overvalued compared with the industry. But with an EV/EBITDA ratio of 9.85, Exxon Mobil is clearly cheaper than Chevron, whose value for the metric stands at 10.53.
Earnings History, ESP and Estimate Revisions
Considering a more comprehensive earnings history, both Chevron and Exxon Mobil have delivered positive surprises in three of the trailing four quarters. However, Chevron has a higher average earnings surprise of 19.4% compared to Exxon’s figure of 8.9%.
When considering Earnings ESP, however, Exxon Mobil is the clear winner with an ESP value of +1.78%, clearly superior to Chevron’s value of -6.16%. At the same time, Chevron’s earnings estimate for the current year has increased by 5.1% over the last thirty days, compared to Exxon’s increase of 1.8%.
Conclusion
Our comparative analysis shows that Chevron holds and edge over Exxon when considering price performance over an extended period, liquidity, estimate revisions and average earnings surprise. However, when considering return on capital, dividend yield, EV/EBITDA ratios, price performance in the short term and ESP values, Exxon is clearly the better stock. What clinches the case in favor of Exxon Mobil is its superior ESP value of +1.78%, compared to Chevron’s figure of -6.16%. This is why it may be better to bet on Exxon Mobil over Chevron as they prepare to report earnings later this week.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>