Exxon Mobil (XOM) has been one of the most popular stocks among Zacks.com visitors recently, so it is a good idea to take a look at some factors that could impact the stock's near-term performance.
Shares of this oil and natural gas company have risen +0.8% over the past month compared to a +3.5% gain for the Zacks S&P 500 Composite Index. The Zacks Oil & Gas – Integrated – International industry, which Exxon belongs to, has gained 0.1% in that time period. The big question here is, where is this stock headed in the near term?
Media announcements or rumors of significant changes in a company's business outlook will usually make the stock “trend” and cause immediate price movements, but there are always some fundamental facts that ultimately drive the buy-and-hold decision.
Earnings forecast revision
At Zacks, we evaluate changes in a company's future earnings estimates above all else because we believe the present value of future earnings streams determines the fair value of a stock.
It essentially looks at how sell-side analysts covering the stock are revising their earnings forecasts to reflect the impact of the latest business trends. As a company's earnings forecasts rise, so does the fair value of its stock. If the fair value is higher than the current market price, investors will be interested in buying the stock, driving the share price up. This is why empirical studies have shown a strong correlation between trends in earnings forecast revisions and short-term stock price movements.
Exxon is expected to post earnings of $2.41 per share for the current quarter, which would represent a +24.2% change from the year-ago period. Over the past 30 days, the Zacks Consensus Estimate has changed -3.5%.
The consensus earnings estimate for the current fiscal year is $9.28, indicating a -2.5% change from last year. This estimate has changed -3.1% over the past 30 days.
Looking at the next fiscal year, the consensus earnings estimate is $10.02, representing a +8% change from what Exxon was expected to report a year ago. Over the past month, estimates have changed -2.6%.
The Zacks Rank, our proprietary stock rating tool that has an impressive outside-audited track record, effectively harnesses the power of earnings estimate revisions and is a more reliable indicator of near-term stock price movements. The magnitude of the recent change in the consensus estimate, along with three other factors related to earnings expectations, has earned Exxon a Zacks Rank of #3 (Hold).
The story continues
The chart below shows the evolution of the company's consensus EPS estimates over the next 12 months.
12 Month EPS
XOM 12 Month Consensus EPS Estimates _12MonthEPSChartUrl
Revenue Growth Forecast
Revenue growth is arguably the best indicator of a company's financial health, but if a company can't grow its revenue, then nothing happens. After all, it's nearly impossible for a company to grow its revenue over the long term without growing its revenue. Therefore, it's important to know a company's revenue growth potential.
For Exxon, the consensus revenue estimate for the current quarter is $91.69 billion, indicating a change of +10.6% year-over-year. For the current and next fiscal years, estimates of $361.02 billion and $380.72 billion indicate changes of +4.8% and +5.5%, respectively.
Last reported results and surprise history
Exxon reported revenue of $83.08 billion for its most recent quarter, down 4% from the same period a year ago. EPS for the quarter was $2.06, down from $2.83 a year ago.
Compared to the Zacks Consensus Estimate of $86.6 billion, reported revenues represented a surprise of -4.06%. EPS surprise was -5.94%.
Over the last four quarters, the company has topped EPS estimates just once, and during that period, the company has surpassed consensus revenue estimates twice.
evaluation
No investment decision can be efficient without taking into account stock valuation. To predict the future price movement of a stock, it is important to determine whether the current price properly reflects the intrinsic value of the underlying business and the company's growth prospects.
Comparing the current value of a company's valuation multiples such as Price to Earnings (P/E), Price to Sales (P/S), Price to Cash Flow (P/CF) with its historical values ​​helps in identifying whether the stock is fairly valued, overvalued or undervalued. Also, comparing a company with its peers based on these parameters gives a good idea of ​​how fair its stock price is.
The Zacks Value Style Score (part of the Zacks Style Scores system) pays close attention to both traditional and non-traditional criteria to rate stocks from A to F (with An being better than B, B being better than C, etc.), which can be very helpful in identifying whether stocks are overvalued, fairly valued or temporarily undervalued.
Exxon is rated a B on this score, indicating that it is trading at a discount relative to its peers. Click here to see the values ​​of some of the valuation metrics that drove this rating.
Conclusion
The facts discussed here, and many other information on Zacks.com, may help you decide whether the market buzz surrounding Exxon is worth following, however, the company's Zacks Rank #3 suggests that Exxon may be positioned to perform in line with the overall market in the near term.
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