Financial Trading Blog
Stock of the day 30/01/2015 – Exxon Mobil Corp
Unsurprisingly for a company that deals in oil, 2014 was a rollercoaster year for Exxon Mobil after it had seen big gains at the end of 2013. It begun last year at $100.15, and bar a drop in February, had a strong first-half performance, reaching a 2014 high of $104.22 by the end of July. However, the troubles in oil slowly began to eat away at the company’s share price, and after hitting $87.44 in the market wide stock slump in mid-October, Exxon bested this low by reaching $86.22 in mid-December. Some stabilisation in oil led Exxon to crawl to $92.17 by the start of 2015, but ahead of its earnings on Monday has fallen back to $87.53 as Friday went on.
The cause of Exxon Mobil’s problems is fairly self-explanatory: the fall and fall of oil. The question surrounding Monday’s earnings release is not if the commodity has had a big effect on the company, but how much oil’s rapid decline has been felt. However, this might play into Exxon’s hands; the impact of oil will likely be priced into the markets by investors, and the company may escape relatively unscathed if it announces any losses come next week.
Following this continued situation in oil, investors will be looking carefully for any sign from Exxon that it is further expanding into the shale gas market. The company has been criticized for its late entry to this latest energy phenomenon, but its sheer size may help it grow whilst smaller operators fold off the back of cheap oil’s profit sapping curse. After striking a new source of shale oil and gas in an Argentinian well in mid-December, Exxon’s shale-enterprise will be a key part of its future and the company would do good to show signs of this on Monday.
The overriding trend of this earnings season has been the effects of the strong dollar on multinational companies, and Exxon may not be exempt from this development. With earnings per share expected to fall from $1.91 to $1.36 year-on-year, alongside a 21% fall in revenue from $110.86 billion to $87.43 billion, the stock has received an average target price of $96.50. If these forecasts prove to be true, it will be interesting to see if Exxon lays the blame solely at oil’s door, or whether the company will include the strong dollar in its list of excuses.
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