Energy giant Exxon Mobil (NYSE:XOM) should log in excess of $500 billion in revenues for all of 2012 but appears to be having little problem growing its asset base for the benefit of shareholders. Its first quarter results were no exception.
Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

First Quarter Recap
Total revenues advanced 8.8% and reached $124 billion during the first quarter. Oil-equivalent production fell 5% but higher oil prices helped boost prices, as did other income and higher refining activities. Net income ended up falling 11.3% to $9.5 billion as upstream earnings declined 10% to $7.8 billion. Chemical earnings fell by more than half to $701 million. The only standout during the quarter was the downstream operations, which reported a 44% growth to $1.6 billion.

Operating cash flow significantly exceeded reported earnings and came in at $21.8 billion. Backing out capital expenditures of $8.8 billion, free cash flow was approximately $13 billion to also exceed the bottom line by a wide margin. Of this, Exxon repurchased $5 billion of its own stock and paid a couple of billion dollars out as dividends. The current dividend yield is 2.6%.

Outlook and Valuation
For the full year, analysts project more modest sales growth of 3% and total sales just above $500 billion. The current consensus earnings estimate stands at $8.29. For 2013, it currently stands at $8.88. Based off the current share price of $87.12, the forward P/E is 10.6 and 9.8, respectively.

SEE: 5 Must-Have Metrics For Value Investors

The Bottom Line
Exxon's average P/E over the past five years has been quite reasonable at 12.2 and means that the current valuation is more than 10% below these levels. In general, investors today are giving large corporations such as Exxon little credit in terms of their ability to grow at sufficient levels going forward. This may currently apply to rival Dow Jones Industrial Average stocks including General Electric (NYSE:GE), 3M (NYSE:MMM), Merck (NYSE:MRK) and Pfizer (NYSE:PFE), but Exxon doesn't appear to be having the same expansion problems.

For one, it is a globally diversified energy firm. It is also hugely exposed to rising natural gas production opportunities in the United States, thanks to the purchase of XTO Energy a couple of years ago. Management is equally adept at selling off assets and announced $21.8 billion in sales during the first quarter. The excess capital production each quarter demonstrates just how efficiently Exxon manages its capital, which it sends to shareholders in the form of growing dividends and share buybacks.

SEE: A Breakdown Of Stock Buybacks

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Stock Analysis

    The Top 5 Platinum Penny Stocks for 2016 (PLG, XPL)

    Examine five penny stocks in the platinum mining business that investors may wish to consider adding to their investment portfolios for 2016.
  2. Chart Advisor

    Watch This ETF For Signs Of A Reversal (BCX)

    Trying to determine if the commodity markets are ready for a bounce? Take a look at the analysis of this ETF to find out if now is the time to buy.
  3. Investing News

    What You Can Learn from Carl Icahn's Mistakes

    Carl Icahn has been a stellar performer in the investment world for decades, but following his lead these days could be dangerous.
  4. Investing Basics

    The Importance of Commodity Pricing in Understanding Inflation

    Commodity prices are believed to be a leading indicator of inflation, but does it always hold?
  5. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  6. Fundamental Analysis

    4 Predictions for Oil in 2016

    Learn four predictions for oil markets in 2016 including where prices are heading and the key fundamental factors driving the market.
  7. Fundamental Analysis

    Performance Review: Commodities in 2015

    Learn how commodities took a big hit in 2015 with a huge variance in performances. Discover how the major commodities performed over the year.
  8. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  9. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  10. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
RELATED FAQS
  1. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  2. Do hedge funds invest in commodities?

    There are several hedge funds that invest in commodities. Many hedge funds have broad macroeconomic strategies and invest ... Read Full Answer >>
  3. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  4. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  5. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center