Exxon’s estimates are falling. I’m surprised because the world economy is expected to improve next year. So why isn’t XOM increasing estimates?
One Year Chart
XOM looks very good on the one-year chart. The first thing that stands out is the stock has formed a cup-and-handle with a breakout point of $82. The charts in this article were made on 12/14, and XOM is breaking out today, with the current quote $82.82.
Profits have been solid the last four quarters, but Estimates for the next two quarters show growth is weakening.
XOM’s P/E is only 9, but this company likely won’t get a P/E over 12. The estimated Long Term Growth Rate is 9% and the company pays a 2% dividend, so XOM is worth 11 times earnings to me. That equates to $92, only 11% higher than the current quote.
Earnings Table
The earnings table shows a lot of red. I don’t like the fact quarterly estimates have been declining. Now 2012 profit growth is expected to be less than 2011’s. That means the P/E would likely have to rise for the stock to rise — and that’s tough to do when estimates are falling and profit growth is negative.
This is the second straight quarter estimates have declined. so this is a trend. Worldwide demand for oil needs to rise.
Bottom Line
I think 2012 is all about dividend paying stocks. That means XOM should go higher. But profit estimates are falling — so much that 2012 profits will likely come in under 2011’s. Exxon stock is not looking like a good investment, even at 9 times earnings. Wait for a dip to the low $70s.
Disclosure: At the time of publication clients of DavidSharek.com owned shares of XOM.