Earnings Scorecard: ExxonMobil

Though ExxonMobil Corp. (XOM - Analyst Report) posted strong results in the second quarter, the stock performance was not so impressive. The company’s share price has dropped approximately 11% year to date. While we believe the stock will perform in line with its peers and the S&P 500 over near to medium term, investors will have to wait and see the results of the XTO Energy integration.

Exxon completed the XTO merger in late June. With the entire business of XTO Energy now on Exxon’s board, the long-term growth outlook of the oil giant is more vivid on the back of solid access to unconventional resources.

Earnings Review

Net income from operations in the second-quarter was $1.60 per share, compared with the Zacks Consensus Estimate of $1.46 and year-earlier earnings of 84 cents.

Total revenue in the quarter increased more than 24% year over year to $92.5 billion, but fell short of the Zacks Consensus Estimate of $100 billion.

We have discussed the quarterly results at length here: ExxonMobil Net Nearly Doubles

Agreement of Analysts

The overall trend in annual estimates remains positive, with 9 of 18 analysts raising projections for 2010 in the last month, while 4 moved in the opposite direction. No movements were witnessed in the last 7 days. For 2011, six of 18 analysts covering the stock moved upward in the last 30 days, while 5 reduced expectations. However, we noticed no movements in the last 7 days.

Magnitude of Estimate Revisions

Given the positive tone of the revisions, the Zacks Consensus Estimate for fiscal 2010 increased 4 cents over the last month. However, earnings estimates for fiscal 2011 decreased 17 cents over the same period, though it remained flat with week-ago estimates. The current Zacks Consensus Estimate is pegged at $5.78 and $6.61 for 2010 and 2011, respectively.

Neutral Rating Maintained

Given Exxon’s significant share in the upstream business (accounting for roughly 74% of first half 2010 net income), we believe that it will retain its leverage to higher oil prices going forward.

With the XTO deal now complete, Exxon has access to significant unconventional resources and is getting a major handle on North America's newest energy discoveries, as it looks forward to the growth of natural gas in expanding its share of the world's largest energy market.

While management is focused on delivering superior long-term financial performance, we believe investors will be concerned about the lackluster liquids production profile. In the first-half of 2010, liquids production was lower compared with the year-ago period.

ExxonMobil is the best-run integrated oil company in the world given its track record of superior return on capital employed. It remains to see how Exxon maintains this trend following the completion of the XTO merger. Until then, we maintain our short-term Zacks #3 Rank ('Hold') rating and a long-term Neutral recommendation.

About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard" articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/

Read the full analyst report on XOM