ExxonMobil Looks to Earn More From Less

On Thursday, ExxonMobil (NYSE: XOM  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever surprises inevitably arise. That way, you'll be less likely to have an uninformed, knee-jerk reaction that turns out to be exactly the wrong move.

As the largest energy stock in the Dow Jones Industrials (DJINDICES: ^DJI  ) , ExxonMobil has faced a big challenge in keeping its production levels high enough to sustain revenue growth. Yet the company has done a good job making the most of what sales it can muster. Let's take an early look at what's been happening with ExxonMobil over the past quarter and what we're likely to see in its quarterly report.

Stats on ExxonMobil

Analyst EPS Estimate

$2.05

Change From Year-Ago EPS

2.5%

Revenue Estimate

$119.83 billion

Change From Year-Ago Revenue

(3.4%)

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Can ExxonMobil keep pumping ahead this quarter?
Analysts have made several adjustments to their views on Exxon's earnings over the past few months, but the net effect has been minimal. First-quarter estimates have risen by $0.02 per share, but full-year 2013 calls have stayed flat. The stock has barely budged, falling by less than 1% since mid-January.

Given its size, Exxon has to work hard just to stand still on the production front. Because existing wells naturally see declines in output over their productive lifetimes, Exxon has to look for new sources constantly in order to replace aging wells. The company is even less nimble than fellow Big Oil players Chevron (NYSE: CVX  ) and ConocoPhillips, both of which expect much greater production growth than Exxon's targeted 2% to 3% growth. Chevron now expects 6% growth per year through 2017, while Conoco is seeking 3% to 5% annual growth over that period.

Exxon has also had to deal with past strategic moves that haven't worked out as well as it had hoped. The company has done its best to salvage what it could from its $40 billion acquisition of XTO Energy, which gave the company substantially greater exposure to the natural-gas industry at what proved to be just about the worst time possible. Chevron arguably made a similar mistake with its purchase of Atlas Energy, but the much larger Exxon acquisition will continue to plague the company to a greater extent until natural-gas prices fully recover to their early-2008 highs.

Most recently, Exxon has had to deal with the environmental cost of its integrated operations. An oil spill in Arkansas has led to a minor suit that won't have a material impact on the company's finances, but with a similar incident having occurred on the Yellowstone River in Montana back in 2011, the safety of the nation's growing network of pipelines has come into the spotlight again and could affect Exxon's ability to expand its midstream operations.

In Exxon's report, watch for the company's comments on falling oil prices and rising natural-gas prices. If the two fuels start moving toward pricing parity again, then it may open new avenues for Exxon to grow in the future.

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