Essay PreviewMore ↓
Exxon Mobil is world’s largest publicly traded integrated oil company serving companies in more than 200 countries worldwide. Standard and Poor’s stock report for Exxon Mobil indicates that Exxon’s global functional organization and substantial diversification helps mitigate its exposure to business risk and margin volatility.
As of December 31, 2007 Rex W. Tillerson has been serving as CEO of corporation since two years along with Senior Vice Presidents M. W. Albers, M. J. Dolan and D. D. Humphreys. They manage 51% institutional ownership of the company.
In terms of Equity Financing strategies, Exxon is implementing a continuous stock repurchase program rather than equity financing. In the first half of 2007, Exxon’s gross share purchases were worth $16 billion, reducing the shares outstanding by 3.2 percent. In 2006, Exxon Mobil paid out 1.77 percent of its stock price in dividends, about equal to the dividend yield for the entire S&P 500. Factoring in the $29.6 billion Exxon Mobil spent on buybacks that year, its yield jumps to 8.64 percent. Public companies share the wealth with investors mainly through dividends and stock buybacks, and both actions have historically benefited investor returns. Since both types of yield signify added value to shareholders, investors should be able to improve their odds in the market by harnessing the power of both statistics. Buybacks benefit shareholders by reducing the amount of stock, giving each remaining share a bigger slice of a company's earnings. Although U.S. policymakers claim that the company does not invest enough in new pumping capacity and spends too much on share buybacks, CEO Rex Tillerson reports that company disagrees with claims.
As company re-purchases on stocks essentially tells the market that they think that the company’s stock is undervalued. It is expected that this will have a psychological effect on the market. Also, the stock buybacks raise the demand for the stock on the open market.
How to Cite this Page
"Exxon Equity Analysis." 123HelpMe.com. 22 May 2019
Need Writing Help?
Get feedback on grammar, clarity, concision and logic instantly.Check your paper »
- ExxonMobil is the largest publicly traded oil and gas producing company. ExxonMobil does business in 200 countries world-wide (1). Some countries are designated for exploring gas and petroleum, and some are designated for manufacturing chemicals, lubricants, and market fuels (1). ExxonMobil's world-class petroleum portfolio gives access to proven reserves of 21.9 billion oil-equivalent barrels of oil and gas, which is the highest in the industry (1). The company's discovered resources consist of 72 billion oil equivalent barrels of oil and gas.... [tags: Business Analysis]
1280 words (3.7 pages)
- Exxon Mobil 1. Exxon Mobil's nature of business is a natural haven for criticism; reporting record profits for 2005 only added fuel to the fire so to speak. The topic of nearly every conversation around the country had something to do with how much people were shelling out at the pumps or how the cost of most consumer goods was increasing a rate never experienced before; Exxon Mobil's feat did nothing but bring negative attention to the firm. However, Exxon Mobil knew that their profits wouldn't be well accepted by the general public and did its best to do a little damage control by creating charts comparing their profits to other industries, holding press conferences and by trying to educa... [tags: Business Analysis Strategy Management]
1324 words (3.8 pages)
- DuPont Analysis DuPont equation provides a broader picture of the return the company is earning on its equity. It tells where a company 's strength lies and where there is a room for improvement DuPont analysis examines the return on equity (ROE) analysing profit margin, total asset turnover, and financial leverage. DuPont analysis decomposing ROE into its components allows analyst to identify adverse impact on ROE and predict the future trends. Return on equity (ROE) measure the rate of return flowing to shareholder.... [tags: Financial ratios, Revenue, Investment]
727 words (2.1 pages)
- Most people believe that one man-made natural disaster would teach us to be better, but we have learned that history repeats itself. The Exxon Valdez oil spill (in 1989) and the Deepwater Horizon oil spill, or BP oil spill, (in 2010) were both devastating oil spills that shocked the nation. The Exxon Valdez oil spill occurred due to a tanker grounding. The BP oil spill was caused by an explosion on the Deepwater Horizon oil platform. These two oil spills were both disasters and had greater effects in certain categories.... [tags: oil spill, exxon, bp oil, oil platforms]
863 words (2.5 pages)
- Equity in Human Resource Management Introduction The effective Human Resource Management in an organization requires an exceptional standard set for motivation, job design, reward system and equity. Nowadays, people are more willing to avoid unfair treatment in the workplace than any other aspect. The fundamental concept behind Equity is an attempt to balance what has been put in and taken out at the workplace with a feeling of justice being served. Unconsciously, values are assigned to many various contributions made to the organization, hence causing an air of misbalance in the environment.... [tags: Equity Theory, Need-Hierarchy Theory]
2507 words (7.2 pages)
- Introduction: We have been engaged to audit the financial statements for Exxon Mobil Corporation (ExxonMobil) and assess the effectiveness of their internal controls for the fiscal year ended December 31st, 2010 in compliance with the laws of the state of Texas and the standards set forth by the Public Company Accounting Oversight Board (PCAOB). In the previous memo sent, we outlined the client’s high inherent risk due to the account balances and transactions, foreign currency translations and the complexity of accounting for and auditing the client’s vast oil reserves and inventories.... [tags: Business Analysis ]
1564 words (4.5 pages)
- When starting a business an important question arises, how to finance the company. The steady economic growth combined with low interest rates has produced a lot of liquidity in debt and equity markets. For example, in 2005, non-financial corporate business borrowing increased dramatically to $289 billion, compared to the mere $174 billion it was in 2004 and the $85 billion it was in 2003 (Chung). The outcome of using only debt financing or only equity financing is mostly direct. Businesses run ino the issue when a company’s finance requires both debt and equity characteristics, changing the tax effects greatly (Hanke).... [tags: finance, equity, accounting]
674 words (1.9 pages)
- Exxon Mobil Exxon Mobil is listed as one of the worlds largest fortune 500 companies according to Fortune Magazine, 2006. Because of its size, I became interested in this company for my research paper on corporate social responsibility. Exxon Mobile has a rich history that dates back to 1859. It all started when two individuals drilled an oil well in Pennsylvania.... [tags: Business Analysis Management]
1964 words (5.6 pages)
- Equity, Cash Flow, and Notes Analysis Introduction The success of a business entity depends on its ability to properly create, understand and analyze the financial statements. Financial statement analysis is important for understanding profitability and a firm's financial condition. These documents help a firm in many ways, such as in making better financial decision and creating a clearer picture to attract creditors and investors. In highlighting the financial numbers for Wal-Mart, Team A will address the owner¡¦s equity and the cash flow pieces of the business ending fiscal period January 31, 2004.... [tags: Business Corporate Finance]
1075 words (3.1 pages)
- Oil spills have often occurred too many times in this world. Unfortunately, when this does happen, there is always losses of life. Many people are affected by it. There is always a price to pay. On March 24, 1989 the Exxon Valdez oil tanker spilt all its oil into the ocean. Going about twelve miles per hour, the doubt of a oil spill was highly unlikely. But, when the oil tanker hit Bligh Reef in Alaska’s Prince William Sound, the worst oil spill in United States history occurred. Consequently, more than eleven million gallons of oil spued into the ocean.... [tags: essays research papers]
998 words (2.9 pages)
2. OVERALL PAST PERFORMANCE
Exxon Mobil’s fundamental ratio analysis for Equity figures are represented in below table as it indicates clues about company’s aggressive growth strategies. In 2007, Exxon Mobil is heavily reinvesting to itself. As Exxon reports the record profit ever for a U.S. company $40.6 billion in 2007, they tend to reinvest to company majorly for expanding purposes around the world. Referring to the table below, market is willing to pay$12.87 for every single dollar amount sales generated by the company in 2007. Over three years trend, Exxon Mobil is continuously buying back common stock from market as the number of shares outstanding is declining. As they reduce outstanding available shares in market, and increase their earnings over three years trend, EPS is also increasing. By December 31, 2007 Exxon Mobil has $466,392 billion Market Capitalization along with the 1.07 Beta of the stock which indicates a growth orientation relatively to S&P 500 index.
Key Stock Statistics - XOM
52-Week Range $96.12-77.55
Trailing 12-months EPS $7.69
Trailing 12-months P/E 11.5
Common Shares outstanding 5,283.7 million
Market Capitalization $466.392 billion
Dividend Rate/Share 1.6
Institutional Ownership 51%
S&P Credit Rating AAA
Table 1 : Key Stock Statistics - XOM, end of year 2007
Key Ratios, EQUITY- XOM
2005 2006 2007
P/E 9.83 11.58 12.87
Price to Sales 0.96 1.21 1.29
Price to EBITDA 5.99 3.05 3.33
Price to Pretax Income 5.9 6.68 7.31
Dividend Payout Ratio 20% 19% 19%
Earnings(millions) 358,955 365,467 390,328
# of shares(millions) 62,864 54,793 53,616
Earnings per Share 5.71 6.67 7.28
Table 2: Key Ratios, Equity – XOM
3. FUNDAMENTAL ANNUAL GROWTH
a. Earnings per Share:
EPS (Earnings Per Share): Net income net of preferred dividends divided by a weighted average of total shares outstanding for the year including potential shares represented by options issued by the company. This figure is a useful snapshot of how much a company earned in a given year, and how much earnings power is represented by a shareholder's claim on the company. The measure is also useful relative to historical and forecast value as a way to evaluate the earnings growth potential for a company, and the historical and potential returns for a shareholder. This figure is found at the bottom of the company�s income statement
b. Equity per Share:
Equity/Share: This figure represents the company's accounting equity, also known book value per share of the company. Equity is a company�s total assets minus its total liabilities�in other words, what�s left over for shareholders. Equity per share represents the value of the assets of the company backing up each share of the company's stock. Growth in equity per share is one variable used to determine if a company is increasing shareholder wealth over time. Note, too, that because it's expressed on a per-share basis, equity growth per share takes into account dilution from new-share issuances.
4. FUNDAMENTAL FINANCIAL EFFICIENCY
a. ROE Analysis:
b. Return Analysis:
Return Analysis: This graph decomposes the total return per share into three components: change in earnings, change in price to earnings multiple, and dividend payments. The constant multiple line describes what the share price would be if the shares traded at the same price to earnings multiple as the beginning of the period, representing the return due to changes in earnings. When the share price line is above the constant multiple line, the price to earnings multiple is higher than the beginning of the period and when the share price line is below the constant multiple line, the price to earnings multiple is lower than at the beginning of the period. The total return line represents the value that a shareholder would have received from the beginning of the period, by adding the cumulative dividends paid since the beginning of the period to the share price.
5. FUNDAMENTAL FINANCIAL HEALTH
Debt/Equity :Long-term debt divided by the accounting shareholders� equity. Increasing debt/equity means an increasing proportion of the company's assets are owned by debt holders, and represents increasing risk of bankruptcy if the company encounters operating difficulties; however, an increasing debt/equity ratio also increases returns to equity holders. This figure is not meaningful appropriate for financial companies.
b. Debt/Total Capitalization:
Debt/Total Capitalization: Long-term debt (excluding other liabilities) divided by total capitalization (the sum of common equity plus preferred equity plus long-term debt). Increasing debt/total capital means an increasing proportion of the company is owned by debt holders, and represents increasing risk of bankruptcy if the company encounters operating difficulties, however increasing debt to equity ratio also increases returns to equity holders. This figure is not meaningful for financial companies
6. PRICE PERFORMANCE OF STOCK IN 2007
7. HISTORICAL PRICE PERFORMANCE OF STOCK vs. S&P500 & U.S. MARKET
EXXON MOBIL XOM
8. GROWTH OF $10,000 INVESTMENT in EXXON vs. S&P 500 & INDUSTRY
Growth of $10,000 YTD through 07-25-08
Stock: ExxonMobil Corporation
Industry: Oil & Gas
Index: S&P 500
Total Returns % 2003 2004 2005 2006 2007
Stock 20.6 28.0 11.8 39.1 24.3
+/- Industry -13.8 8.0 -13.2 18.6 -2.6
+/- S&P 500 -5.7 19.1 8.8 25.4 20.8
9. FREE CASH FLOW ANALYSIS
One of the first things to do when examining an investment idea is to review historical FCF trends. This exercise helps on the economic value producing potential of an enterprise. The below chart illustrates the major factors that affect stock price. In order to eliminate the unsystematic risk on the stock the Free Cash Flow trend gives strong idea of management efficiency of the corporation.
While calculating the FCFs of company, the following formula is used.
Free cash flow (FCF) = Operating cash flow (OCF) - Capital Expenditures (Cap-ex).
Annual XOM Free Cash Flow ($ Billions)
Year Operating Cash Flow Capital Expenditures Free Cash Flow
2002 21.3 11.4 9.8
2003 28.5 12.9 15.6
2004 40.6 12 28.6
2005 48.1 13.8 34.3
2006 49.3 15.5 33.8
2007 52 15.4 36.6
Table 3: Annual Free Cash Flow - XOM
You can see that XOM's operating cash flow has increased by about 150% over the past few years. During this period, capital expenditures have increased less than 50%. As a result, free cash flow has increased nearly fourfold, reaching nearly $37 billion in 2007.
10. ESTIMATED FUTURE VALUE OF XOM and RECOMMENDATIONS
Exxon Mobil is considered as a large-cap blend stock in the market orienting both growth and value strategies at the same time. Under such slow economic condition of market, Exxon Mobil is recommended as a “BUY” with 4/5 rating and an 12 month target price of $103.00 by Standard and Poor’s stock report for the company as of July 5, 2008. Also, the risk associated with the company is stated as “Low” as the assessments of S&P reflects Exxon’s diversified and strong business profile in volatile, cyclical and capital-intensive segments of the energy industry. S&P considers ExxonMobil’s earnings stability and corporate governance practices as above average.