Exxon Mobil: Should You Stay Long?

Exxon Mobil (XOM) is focusing on business fundamentals, including cost management. For instance, the company during the quarter managed to decrease its corporate and financing expenses. Its corporate and financing expenses came in at $378 million for the quarter, down approximately $192 million from the third-quarter of 2014, driven by favorable tax and financing items. So, all-in-all the company generated approximately $215 million of savings through its corporate and financial costs management.

Apart from these, the company continues to focus on business fundamentals that are driving significant savings for Exxon Mobil.
In fact, the company generated approximately $8.00 billion through this costs management this year so far. Its reluctant focus on operational integrity, maximization of reliability and reducing the unit costs for upstream contributed significantly to this strong savings.

This strong costs management and consistent focus on business fundamentals should help the company to improve its bottom line performance this year. In fact, the company will be in a better position to withstand against the falling oil and gas prices.

Limiting its capital expenditure

Exxon Mobil is taking additional steps to mitigate the effect of lower crude oil prices. The company is limiting or deferring its investments in order to maintain strong operating as well as free cash flows. At the same time, it is effectively engaged in driving shareholders value, as it increases its dividend this quarter by approximately 5.8% as compared to the same quarter last year. Also, it generated approximately $7.4 billion of free cash flows from its operations this year so far. The chart below illustrates its sources of cash and usages of cash for the first-nine months of the year.


Exxon Mobil is making significant progress in terms of limiting its investments and reducing its corporate and financing costs. Also, it is investing aggressively in the downstream business that should enhance its growth. The stock is still down approximately 13% since year-to-date that creates an opportunity for value investors to buy more of the shares and maximize their earnings in the future.
Published on Jan 7, 2016
By Vinay Singh

Copyrighted 2016. Content published with author's permission.

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