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