$200-a-barrel will only benefit Exxon Mobil
Posted May 9th, 2008 by Ben Stevens
Splits:26-Jul-76 [2:1] , 12-Jun-81 [2:1] , 15-Sep-87 [2:1] , 14-Apr-97 [2:1] , 19-Jul-01 [2:1]
This week analyst Paul Y Cheng of Lehman Brothers maintained his "equal weight" rating on Exxon Mobil Corp (XOM), while raising his estimates for the company. The target price has been raised from $92 to $101.
When will oil stop heading up and will we have to pay $5 or $6 a gallon for gas at the pump? There's only one way to offset the costs of oil and gas for Joe Consumer, buy shares of Exxon Mobil Corporation (NYSE:XOM). Take part in the soon to be record profits for the world's largest company on a market capitalization basis.
Exxon wants to cash in as well, why not own more shares of your own company to reap the benefits of your success. Plain and simple, Exxon Mobil plans to have their cake and eat it to. Exxon spent $31.8 billion to buy back shares in 2007 and $8 billion buying back shares in the first quarter. If Wall Street won't raise their shares to a new 52-week high, Exxon Mobil Corporation will do it themselves. Take existing shares off the market, call it their own, and by year end, $125 a share.
To quote a thirsty Hillary Clinton:
"There is something seriously wrong with our economy when Exxon's record $11 billion in quarterly profits are seen as a disappointment by Wall Street," referring to the fact that Exxon's shares fell more than 3% last Thursday. "I believe we should impose a windfall profits tax on big oil companies and use that money to suspend the gas tax and give families relief at the pump."
This time Clinton is right on the money, Wall Street has XOM priced all wrong, just think about where gas and oil price are going? Over the long term, Exxon will keep heading up, it always does:
Exxon financials are more impressive than the seven wonders of the world, even the Great Pyramid of Giza can't compete with these numbers (keep in mind, this is "in millions"):
Financials
(In millions of USD)
| Income Statement | Quarterly (Dec '07) |
Annual (2007) |
Annual (2006) |
| Total Revenue | 116,642.00 | 404,552.00 | 377,635.00 |
| Gross Profit | 23,160.00 | 86,264.00 | 83,809.00 |
| Operating Income | 19,722.00 | 70,474.00 | 67,402.00 |
| Net Income | 11,660.00 | 40,610.00 | 39,500.00 |
| Balance Sheet | |||
| Total Current Assets | 85,963.00 | 85,963.00 | 75,777.00 |
| Total Assets | 242,082.00 | 242,082.00 | 219,015.00 |
| Total Current Liabilities | 58,312.00 | 58,312.00 | 48,817.00 |
| Total Liabilities | 120,320.00 | 120,320.00 | 105,171.00 |
| Total Equity | 121,762.00 | 121,762.00 | 113,844.00 |
This week analyst Paul Y Cheng of Lehman Brothers maintained his "equal weight" rating on Exxon Mobil Corp (XOM), while raising his estimates for the company. The target price has been raised from $92 to $101.
In a research note published on May 2, the analyst mentions that the company’s volumes in 1Q were adversely impacted by the PSC effects. Exxon Mobil’s weak y/y production comps for the quarter were highlighted in stark contrast to the robust results posted by BP and RDS recently, the analyst says. The long-run oil price per barrel estimate (post 2012) has been raised from $70 to $80. The EPS estimates for the current and next year have been raised from $8.20 to $9.00 and from $7.35 to $7.80, respectively.
Exxon posted an almost $11 billion profit for the first quarter of 2008 on a staggering $117 billion in total revenue, which was up from $87.2 billion in revenue last year (or, more than a third of the projected 2008 $311 billion US deficit.) Part of Exxon's windfall still came from higher gas prices, which on average, rose about 30 percent over the year, as oil prices rose from $60 to $100 at the end of the last quarter it reported.
Plus, Exxon's earnings were up 17 percent versus the same quarter last year, pulling in the second-highest quarterly earnings in US history for any corporation. To put it in perspective, Exxon's last earnings for all of 2007 were a record $40.6 billion, which puts them in the running, if oil prices stay where they are, to come in at about 10 percent above that for 2008.
Fellow Masters, put the kids through college on XOM, the end.
Disclaimer: No positions in XOM.
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