Exxon Mobil (XOM) is one of the most watched stocks by Zacks.com visitors lately. So it might be worth looking at some of the factors that could affect the stock’s short-term performance.
Shares of this oil and gas company have returned +1.5% over the past month compared to the +8.7% change in the Zacks S&P 500 composite. The industry Zacks Oil and Gas – Integrated – International, at which Exxon belongs, gained 0.2% over this period. Now the key question is: where could the stock be heading in the near term?
While press releases or rumors about a substantial change in a company’s trading outlook usually “trend” its stock and cause an immediate price change, there are always fundamental facts that ultimately dominate the take. purchase and retention decision.
Revisions to earnings estimates
Rather than focusing on anything else, at Zacks we prioritize assessing change in a company’s earnings projection. Indeed, we believe that the fair value of its shares is determined by the present value of its future earnings streams.
We basically look at how sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest trading trends. And if earnings estimates increase for a company, the fair value of its shares increases. A higher fair value than the current market price stimulates investors’ interest in buying the stock, causing its price to rise. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and short-term stock price movements.
Exxon is expected to post earnings of $3.36 per share for the current quarter, representing a year-over-year change of +112.7%. Over the past 30 days, the Zacks consensus estimate has changed by +10.9%.
For the current year, the consensus earnings estimate of $12.35 indicates a change of +129.6% from the prior year. Over the last 30 days, this estimate has changed by +10.3%.
For the next fiscal year, the consensus earnings estimate of $10.35 indicates a change of -16.2% from what Exxon is expected to report a year ago. Over the past month, the estimate has changed by +4.3%.
have a strong externally audited balance sheet, our proprietary stock rating tool, Zacks Rank, provides a more conclusive picture of a stock’s price direction in the near term, as it effectively harnesses the power of earnings estimate revisions. Due to the magnitude of the recent consensus estimate change, as well as three other factors related to earnings estimatesExxon is ranked Zacks Rank No. 1 (Strong Buy).
The chart below shows the evolution of the company’s consensus 12-month EPS estimate:
12 month EPS
Expected revenue growth
While a company’s earnings growth is arguably the best indicator of its financial health, nothing happens if it can’t grow its revenue. It is almost impossible for a company to increase its profits without increasing its revenue for long periods of time. Therefore, knowing the potential revenue growth of a business is crucial.
For Exxon, the consensus sales estimate for the current quarter of $109.81 billion indicates a year-over-year change of +48.8%. For the current and future fiscal years, the estimates of $418.51 billion and $402.06 billion indicate variations of +46.5% and -3.9% respectively.
Latest reported results and history of surprises
Exxon reported revenue of $115.68 billion in the last quarter, representing a year-over-year change of +70.8%. EPS of $4.14 for the same period versus $1.10 a year ago.
Compared to the Zacks consensus estimate of $118.03 billion, reported revenue is a surprise -1.99%. Surprise EPS was +8.95%.
In the past four quarters, Exxon has exceeded consensus EPS estimates three times. The company has exceeded consensus revenue estimates three times during this period.
Without considering the valuation of a stock, no investment decision can be effective. Crucial to predicting a stock’s future price performance is whether its current price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects.
While comparing the current values of a company’s valuation multiples, such as the price-to-earnings (P/E) ratio, the price-to-sales (P/S) ratio, and the price-to-cash flow (P/CF) ratio , along with its own historical values help determine whether its stock is fairly valued, overvalued or undervalued, comparing the company against its peers on these metrics gives a good idea of the reasonableness of the stock price .
The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to traditional and unconventional valuation metrics to rank stocks from A to F (an A is better than a B; a B is better than a C; and so on), is quite useful in determining whether a stock is overvalued, correctly priced, or temporarily undervalued.
Exxon is rated B on this front, indicating that it is trading at a discount to its peers. Click here to see the values of some of the rating metrics that led to this rating.
The facts discussed here and plenty of other information on Zacks.com might help determine whether it’s worth paying attention to the market buzz about Exxon. However, its Zacks No. 1 ranking suggests it could outperform the broader market in the near term.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.