Morningstar

Exxon Earnings Disappoint, but Dividend Not in Doubt

Our fair value estimate and narrow moat rating for the firm are intact.

Securities In This Article
Exxon Mobil Corp
(XOM)

Downstream earnings increased to $1.4 billion from $825 million last year on higher volumes and wider industry margins. Chemical earnings slipped to $985 million from $1.2 billion last year, largely on higher maintenance activity.

Exxon generated sufficient free cash flow during the quarter to cover capital spending and the dividend. Through the first half of the year, Exxon generated $15.2 billion in operating cash flow, sufficient to fund its $7.5 billion capital expenditure and $6.4 billion in shareholder distributions. Although capital spending is running below full-year guidance, it will likely be back-end-loaded, as is typically the case, while two large acquisitions have yet to be completed. We still expect Exxon to easily fund its dividend, however, and place its break-even level around $40/barrel, the lowest of the group.

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About the Author

Allen Good, CFA

Director
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Allen Good, CFA, is a director, Europe, for Morningstar*. Based in Amsterdam, he covers the oil and gas industries as well as manages a team of multi-industry analysts. He is also chair of the Morningstar Research Services Economic Moat Committee, a group of senior members of the equity research team responsible for reviewing all Economic Moat ratings issued by Morningstar. In this role, he is responsible for ensuring consistent application of Morningstar’s Economic Moat methodology across sectors and regions as well as updating and revising the methodology. His specialty is global integrated oils such as Exxon, Chevron and Shell and US independent refiners such as Valero and Marathon Petroleum. He also contributes to developing hydrocarbon price and petroleum product margin forecasts used in valuation models.

Before joining Morningstar in 2008, He performed merger and acquisition advisory work for a middle-market investment bank. Before that, he spent several years at Black & Decker in various operational roles, primarily focused on manufacturing and distribution.

Good holds a bachelor’s degree in business from the University of Tennessee and a master’s degree in business administration from Kenan-Flagler Business School at the University of North Carolina. He also holds the Chartered Financial Analyst® designation.

* Morningstar Holland BV (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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