Don't Know What To Do With Exxon (XOM)? Throw It Away

For investors, the market is wavering following earnings reported from Exxon Mobile Corporation (XOM). Exxon will earn $4.2 billion in revenues this year. This amount is less than half of what it took in $8.8 billion in revenue for the second quarter of 2014. Exxon's revenue dropped by a third, and the profits of its exploration and production businesses declined 74 percent, to $2 billion. Exxon’s oil and gas production rose nearly 4 percent.

The Jefferies Group, a global investment banking firm, released its latestresearchreport on Monday, rating Exxon's stock as a Hold.

The company estimates the 12-month target price to be at $86. Exxon reported an adjusted earnings per share (EPS) of $1 in the second quarter. The company had missed its consensus estimate of $1.11.

"A second straight quarterly loss in the U.S. production segment was a surprise, given that oil prices were higher than the last quarter," said Brian M. Youngberg, analyst at Edward Jones. Oil prices have been down almost a full 20% this month. Oil prices have been falling throughout 2015. Prices have been plummeting from more than $100 a barrel to now under $50 a barrel. Exxon's stock has been down 25 points from its high and it only gets better -- the oil company is going down in this oil downturn, slashing its buyback in half. Quite sad news for investors.

Should investors be bearish or bullish?

Oil prices are likely not to rebound for now. July was the worst month for oil prices since October 2008. It didn't take Exxon long to figure this out just until this last minute, sparking negative thoughts for investors. Big Oil is not the same as it was before as companies like Exxon take hits. Exxon is now the 5th largest company in the world by market capitalization. It looks like the big oil companies suddenly just woke up after smelling the coffee.

Exxon's stock was down 5% on Friday. Profit plunges of 50% had affected the markets negatively. The pressure is driven by the gap in oil in United States and on the world markets. Resiliency in domestic production and production growth by Saudi Arabia and Persian Gulf states contributed to this globally. Still no rebound, however, the nuclear deal with Iran may impact the million barrels of oil a day worldwide where prices could rebound again for the future.

Let's face it investors, digging for oil is not like it used to be.

Published on Aug 5, 2015
By Jennifer Lynn

Copyrighted 2020. Content published with author's permission.

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