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Market Update

Earnings on Tap: ExxonMobil

Exxon's superior capital allocation and operational performance should drive high returns on capital over the long run.


 ExxonMobil (XOM) will be reporting first-quarter results Thursday ahead of the bell. Analysts, on an average, are expecting earnings per share to come in at $2.04, up from $2.00 logged in the corresponding period a year ago.

During the last quarter of the previous fiscal year, the energy giant reported strong earnings on account of growth in its refining and chemicals segment, which helped offset losses in the oil and gas businesses. Net income came in 6% higher at $9.95 billion compared with the year-ago period, with earnings per diluted share clocking a gain of 12% at $2.19. 

Through a relentless pursuit of efficiency, development, operational improvement, and technology, ExxonMobil consistently delivers higher returns on capital relative to peers, writes Morningstar analyst Allen Good.

Good, however, is concerned about the ongoing low U.S. natural gas prices, which are likely to prove a drag on returns. Although delivering returns on par with historical levels could be more difficult as the company faces challenges of reserve replacement, Exxon is likely to retain its top spot over the longer term, opines Good.

The stock, which has gained a modest 3.2% on a year-to-date basis, presently trades below Morningstar's fair value estimate.

Gazala Parveen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.