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Bear of the Day: ExxonMobil (XOM)

Tracey Ryniec

Exxon Mobil Corp. (XOM) is finding 2019 to be a year it would rather forget. This Zacks Rank #5 (Strong Sell) is expected to see earnings decline 34.3% year-over-year.

ExxonMobil is one of the largest international energy companies in the world. It is one of the largest refiners and marketers of petroleum products. The company also has one of the largest chemical companies in the world.

A Beat in the Second Quarter

On Aug 2, ExxonMobil reported its second quarter results and beat the Zacks Consensus by $0.05. Earnings were $0.73 versus the consensus of $0.68.

Oil-equivalent production was up 7% year-over-year to 3.9 million barrels per day. Liquids production rose 8% driven by the Permian Basin growth and reduced downtime.

Natural gas volumes increased 5%, excluding entitlement effects and divestments.

The company is also preparing to startup the Liza Phase 1 development in Guyana, which has the potential to be huge. The estimated recoverable resource has been raised to more than 6 billion oil-equivalent barrels there.

Analysts Still Cut Estimates

But with WTI and Brent crude trading lower on the year, earnings estimates have been cut throughout the industry.

5 estimates were cut for 2019 in the last month pushing the Zacks Consensus Estimate down to $3.24 from $3.99. However, one analyst has raised his estimate in the last week.

But given that the company made $4.93 a share last year, that's an earnings decline of 34.3%.

Analysts are expecting a rebound for the oil giant in 2020, but 6 analysts still cut their 2020 estimates too in the last 30 days.

The Zacks Consensus is now looking for $4.97, down from $5.59 just 60 days ago.

That Dividend

ExxonMobil's shares are down 8% in the last month and 18.8% over the last year.

It has paid a dividend to shareholders for decades and has actually increased its dividend every year for 37 consecutive years.

With the shares coming down, that dividend is now yielding 5%. That's the highest its been in decades.

The shares aren't "cheap" on a P/E basis with a forward P/E of 21. But most of energy has elevated P/Es during rough times in the industry.

Currently, none of the big, international integrated oil companies have Zacks Ranks of #1 (Strong Buy).

If you're looking for a Big Oil play that has a better Zacks Rank and also pays a nice dividend, consider Chevron (CVX) or BP (BP). Chevron yields 4.1% and BP yields 6.8%. Both are Zacks Rank #3 (Holds).

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