French oil giant Total (TOT +0.00%) had a comme ci, comme aa earnings report, with strong sales but a weak bottom line. While investors may not be encouraged with the results, the company gave no reason to wave the white flag.
By the numbers
Total's $62.4 billion in revenue landed exactly on analysts' estimates for this quarter, but increased acquisition spending this quarter sent earnings tumbling to $1.73 per share, a miss by $0.08. If we consider the earnings adjusted for one-time events, though, Total squeaked out a narrow win by beating analysts by $0.04.
If investors were to look at the sales year over year, they might get discouraged to see that there was a 4% decrease in the quarter. When considering currency changes, though, Total increased sales by 8% in euros. For a French company, it's more important to look at earnings in euros, since the company bases its operations in that currency.
In the company's press release on Oct. 31, Total director general Christophe de Margerie commented on Total's increased exploration in the past quarter. In these past few months, the company has made headway on projects in the Gulf of Mexico, Iraq, the Ivory Coast, Kenya, and Gabon. Total also announced the sale of its stake in pharmaceutical company Sanofi Aventis (SNY 0.79%). So far this year, the company has made 4 billion euros in sales of its current assets and has committed 16 billion euros in investments and acquisitions to increase its reserves.
What a Fool believes
Does anyone else wonder why Total owned shares of pharmaceutical company Sanofi Aventis? A case could be made that the company was looking for a place to invest its loads of cash, but it is peculiar that Total would look to such an ancillary investment when there are so many lucrative options in its own industry. When Chesapeake Energy (CHK +0.00%) started selling off ancillary assets to cover its debt load, investors' confidence in management started to return as the company got back to its core competencies. The same applies for Total. With assets such as Sanofi and chemicals company Geostock on Total's book, management is making the smart move to get rid of these tangential assets.
|
Company |
Return on Assets |
5-Year Expected EPS Growth |
Trailing P/E |
Dividend Yield |
|---|---|---|---|---|
|
Total SA |
8.85% |
4.9% |
8.23 |
5.2% |
|
ConocoPhillips (COP +0.64%) |
9.79% |
(12%) |
7.06 |
4.6% |
|
Occidental Petroleum (OXY +1.13%) |
9.93% |
7.83% |
10.75 |
2.8% |
|
BP (BP +1.73%) |
5.05% |
1.67% |
7.63 |
5.1% |
Source: Yahoo! Finance.
It's hard to see any numbers in this quarter's earnings report that would sway investors one way or the other. But trimming away some of those funky investments and focusing more on exploration could be a good sign for the future. When comparing Total with some of its peers, it doesn't necessarily "win" any individual categories. Overall, though, the company does appear to have the strongest overall position of growth, price, and asset utilization. These factors taken together present a case for Total as a future leader in the upstream oil and gas market.
Current shareholders have no reason to sweat the small dip in earnings. Investors in Total should be looking at this company as a long-term hold so they can reap that healthy dividend (although they do need to keep in mind the tax implications of foreign dividends). This oil giant will be around and will continue to pay dividends for the foreseeable future.
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