Thursday, September 26, 2013

Exxon Mobil Has Underperformed - But Can It Still Boost Shareholder's Value?

The world's leading energy firm Exxon Mobil (XOM) recently released its quarterly results, which came in well below the market's expectations. Exxon Mobil's earnings growth has not been spectacular, its stock generates lower yield than its competitors, and its buyback expenditure has been falling. In these tough times, what should Exxon Mobil do to increase the shareholder value?

Quarterly results

Exxon Mobil's net income dropped by 56.9% to $6.9 billion from $15.9 billion in the same quarter last year. Excluding one-time items, the net-earnings fall was 18.4%. The oil giant's revenue fell from $127.4 billion last year to $106.5 billion in Q2-2013.

Earnings from the upstream segment in the U.S. increased by 61.6% but decreased by 32% in international markets. On the other hand, downstream earnings fell significantly in the U.S. and international markets. In chemicals, there was a slight increase in the U.S. earnings but a significant decline in the rest of the world.

The company's earnings growth over the years is shown in the picture below. As evident, the EPS growth has been modest at best, particularly since Q2-2010 ... Read More