Exxon Mobil Corporation (XOM) Catches Investors’ Attention: Here’s What You Need to Know
Exxon Mobil (XOM) is one of the most watched stocks by Zacks.com visitors lately. So it might be worth looking at some of the factors that could affect the stock’s short-term performance.
Over the past month, shares of this oil and gas company have returned +7.2%, compared to the +11.4% change in the Zacks S&P 500 composite. During this period, the industry Zacks Oil and Gas – Integrated – International, which includes Exxon, gained 11.3%. The key question now is: what could be the future direction of the title?
Although media reports or rumors of a material change in a company’s business outlook usually cause its stock to trend and result in an immediate price change, there are always certain fundamental factors that ultimately determine the buy and hold decision.
Revisions to earnings estimates
Rather than focusing on anything else, at Zacks we prioritize assessing change in a company’s earnings projection. Indeed, we believe that the fair value of its shares is determined by the present value of its future earnings streams.
We basically look at how sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest trading trends. And if earnings estimates increase for a company, the fair value of its shares increases. A higher fair value than the current market price stimulates investors’ interest in buying the stock, causing its price to rise. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and short-term stock price movements.
For the current quarter, Exxon is expected to post earnings of $3.38 per share, a change of +113.9% from the prior year quarter. The Zacks consensus estimate has changed by +11.5% in the past 30 days.
For the current fiscal year, the consensus earnings estimate of $12.43 indicates a change of +131% from the prior year. Over the last 30 days, this estimate has changed by +10.2%.
For the next fiscal year, the consensus earnings estimate of $10.40 indicates a change of -16.3% from what Exxon is expected to report a year ago. Over the past month, the estimate has changed by +4.7%.
With an impressive externally audited track record, our proprietary stock rating tool – the Zacks Ranking – is a more conclusive indicator of a stock’s short-term price performance, as it effectively harnesses the power of earnings estimate revisions. . The magnitude of the recent shift in the consensus estimate, along with three other factors related to earnings estimates, resulted in Zacks ranking No. 1 (Strong Buy) for Exxon.
The chart below shows the evolution of the company’s consensus 12-month EPS estimate:
12 month EPS
Expected revenue growth
Although earnings growth is arguably the most superior indicator of a company’s financial health, nothing as such happens if a company is unable to increase its revenue. After all, it is almost impossible for a company to increase its profits for an extended period of time without increasing its revenue. It is therefore important to know the potential revenue growth of a company.
For Exxon, the consensus sales estimate for the current quarter of $109.81 billion indicates a year-over-year change of +48.8%. For the current and future fiscal years, the estimates of $418.51 billion and $402.06 billion indicate variations of +46.5% and -3.9% respectively.
Latest reported results and history of surprises
Exxon reported revenue of $115.68 billion in the last quarter, representing a year-over-year change of +70.8%. EPS of $4.14 for the same period versus $1.10 a year ago.
Compared to the Zacks consensus estimate of $118.03 billion, reported revenue is a surprise -1.99%. Surprise EPS was +8.95%.
In the past four quarters, Exxon has exceeded consensus EPS estimates three times. The company has exceeded consensus revenue estimates three times during this period.
Evaluation
No investment decision can be effective without considering the valuation of a stock. Whether a stock’s current price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects is a critical determinant of its future price performance.
Compare the present value of a company’s valuation multiples, such as its price/earnings (P/E), price/sales (P/S), and price/cash flow (P/CF), to its own historical values help determine whether its stock is fairly valued, overvalued or undervalued, while comparing the company against its peers on these parameters gives a good idea of the reasonableness of its price.
As part of the Zacks Style Scores system, the Zacks Value Style Score (which assesses both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on.), which is useful in determining whether a stock is overvalued, correctly valued, or temporarily undervalued.
Exxon is rated B on this front, indicating that it is trading at a discount to its peers. Click here to see values for some of the rating metrics that led to this rating.
Conclusion
The facts discussed here and plenty of other information on Zacks.com might help determine whether it’s worth paying attention to the market buzz about Exxon. However, its Zacks No. 1 ranking suggests it could outperform the broader market in the near term.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
