The Street vs. Tyler Smithson: Exxon Mobil

The Street vs. Tyler Smithson

Exxon Mobil Q1 Results

Actual Q1 Revenue:  $90.25 Bil

Actual Q1 EPS:  $1.33

Adj. Q1 EPS:  $1.37

Here we go again, folks!  It’s now time to find out who better predicted quarterly earnings, The Street or Tyler Smithson. 

Exxon Mobil Q1
	Actual	Wall Street	% Error	Tyler Smithson	% Error
Q1 EPS	$1.33	$1.41	6.02%	$1.37	3.01%
Adj. Q1 EPS	$1.37	$1.41	2.92%	$1.37	0.00%
Q1 Rev	$90.25	$96.41	6.83%	$92.88	2.91%

Q1 EPS:  Exxon (“XOM”) reported a quarterly EPS figure of $1.33.  However, this number includes a charge of -$0.04 due to the recently passed healthcare legislation.  When adjusted for this expense (not “cost”), EPS actually came in at $1.37.  Analysts on average predicted an EPS figure of $1.41, a difference of 6.02% from $1.33, and 2.92% higher than the adjusted figure of $1.37.  On the other hand, Tyler Smithson forecasted Q1 EPS at $1.37, which is a difference of only 3.01% (half of The Street’s variation) from the reported figure of $1.33, and exactly the same as adjusted EPS.  Scorecard:  Smithson: 1, Wall Street: 0

Q1 Revenue:  Revenue was actually $90.25 Bil for the first quarter.  Analysts were shockingly far off on this one—6.83%—compared to 2.91% for Smithson.  When looking at revenue dollar-for-dollar, The Street was off a whopping $6.16 Bil!  This is in contrast to $2.63 Bil for Tyler Smithson.  Scorecard:  Smithson: 2, Wall Street: 0   BLOWOUT

This marks yet another instance where I have outperformed the big Wall Street firms.  I better predicted earnings for RIMM, GOOG, and now XOM, while also sounding the alarm for eBay shareholders.  I hope that many of my readers realize the importance of the information they have been given.  Stocks move according to earnings expectations, and those with accurate information slaughter those with inaccurate information. 

If you like what you’ve been reading over the past few weeks, then be sure to click “Follow” in the upper-right portion of your screen.  Considering just how accurate I was with Exxon’s earnings, I hope that many of you will become followers.

I’m not sure which company I’ll analyze next, but I hope to make that announcement in another day or two.  If you have any suggestions, I'd be happy to consider them, just leave a comment. 

XOM Ownership

Author:   NO

Author’s Family:  NO

Disclaimer:
· Opinions, estimates and projections contained in this report are of the author as of the date published and are subject to change without notice.
· This report is not, nor should it be construed as, an offer to sell or solicitation of an offer to buy any securities.
· Unless otherwise noted, all research reports provide information of a general nature and do not address the circumstances of any particular investor.

A Glimpse Into Exxon's Future

Exxon Mobil Forward-Looking Analysis

Q2 Revenue Estimate:  $97.03 Bil

Q2 EPS Estimate:  $1.47.

1-Year Price Target:  $88.35..

Income Statement
Three months ended June 30, 2010
Operating Revenue	$97,027
Income from equity affiliates	$2,620
Other income	$642
Total Revenue	$100,288
Costs & Other Deductions	$88,733
Income before Taxes	$11,555
Income Taxes	$4,530
NI w/ NC Interests	$7,025
NI Attributed to NC Interests	$99
Net Income	$6,926
EPS	$1.47

Wall Street analysts are currently expecting second-quarter revenue and EPS to come in at $99.56 Bil and $1.44, respectively.  I am forecasting revenue to be approximately 2.5% below consensus and EPS to be $0.03 above.  The variation in EPS really boils down to different cost estimates in the quarter, with analysts forecasting higher operating costs quarter-over-quarter, while revenue variation is primarily a result of different revenue models.

For me, determining Exxon’s (“XOM”) price target was a lot of fun (I know I'm lame).  There are two main steps needed to create a price target.  First, a multiple (P/E) must be formulated, and second, the next four quarters of earnings must be estimated.  In the case of XOM, the first step was easy.  All I did was divide the current market price of $68.27 by the sum of the last three quarterly EPS figures (Q2, Q3, Q4) and my estimate for Q1.  The result was $68.27/$4.47, or a P/E of 15.28.  This is slightly less than the P/E reported on Yahoo! Finance because that figure does not factor in the EPS estimate for the first-quarter of 2010.  The “fun” part started with the second step—predicting 2010 quarterly EPS figures for Q2, Q3, and Q4.  In order to estimate Exxon’s earnings in these future quarters, I first had to predict revenue, which involved projecting future oil and gasoline prices.  Given that XOM’s revenue is nearly 100% dependent on energy prices, I needed to have accurate projections.  This is where Monte Carlo Simulation comes in (Sweet name, isn’t it?).  When I write these blog posts, I’m always afraid of my readers getting bogged down with statistics.  Therefore, all I’ll say about Monte Carlo Simulation is that it involved running tests on 5,000 random numbers in order to forecast future oil and gasoline prices.  These average quarterly projections were then used to predict future revenue and can be seen by the following table:

Crude Oil
Mean	$82.75	Q2
Mean	$82.38	Q3
Mean	$83.62	Q4
Gasoline
Mean	285.16	Q2
Mean	294.44	Q3
Mean	300.28	Q4

Once I had the estimate for 2010 earnings ($5.78), all I had to do was multiply the P/E by $5.78, resulting in a 1-year price target of $88.35.  Average analyst price target is currently $81.20, with a range of $70-$92.  I am on the high side, mostly because I am forecasting better cost-management throughout the year. 

Exxon will report earnings before the bell on Thursday, April 29^th and I will be here to post the results, along with my take on their overall performance. 

If you like what you’ve read, I hope you’ll click “Follow” in the upper-right portion of the screen.  I also encourage you to post a comment or “Buzz up!” the article. 

XOM Ownership

Author:   NO

Author’s Family:  NO

Disclaimer:
· Opinions, estimates and projections contained in this report are of the author as of the date published and are subject to change without notice.
· This report is not, nor should it be construed as, an offer to sell or solicitation of an offer to buy any securities.
· Unless otherwise noted, all research reports provide information of a general nature and do not address the circumstances of any particular investor.

Exxon Mobil Quarterly Analysis

Exxon Mobil Q1 Estimates

Here are my estimates for Exxon’s first-quarter earnings due out Thursday, April 29th:

Q1 Revenue Estimate:  $92.9 Bil

Q1 EPS Estimate:  $1.37

I completely underestimated just how much time I would spend on Exxon’s (“XOM”) earnings.  Most of my efforts were dedicated to creating various revenue models.  Those who regularly follow this blog know that the first step I take when analyzing a company is to estimate total revenue.  They also know that I have five particular models of regression that I regularly employ:  First-Order Polynomial, Deseasonal, Dummy Coding, Autoregression, and Exponential.  For those of you without a statistics background, I hope that you will not get too discouraged by my lingo.  Regression is simply a way to forecast numerical data (in this case revenue) by using independent variables, like historical GDP or crude oil prices.  After many attempts at creating a revenue model accurate enough to predict last quarter’s sales, I finally realized that crude oil prices were the best predictor of XOM’s earnings.  I wasted so much time creating complicated models, when all I had to do was regress past revenue against the price of crude oil.  As a result, the model I created predicts with a high level of accuracy (R^2) that Q1 revenue will come in at $92.9 Bil.

Once revenue was determined, everything else seemed to fall right into place.  After creating and analyzing common-size income statements over the past twelve quarters, I settled on a Q1 EPS estimate of $1.37.  This is $0.03 below current Street consensus, which actually goes along with analysts’ past tendency to overestimate Exxon’s quarterly EPS.  In fact, analysts have overestimated the past four quarterly EPS numbers by an average of 4.75%. 

After reading through hundreds of pages of past financial statements, Exxon appears to be a steady, giant, and unwavering example of American Capitalism.  

Here are my line-by-line estimates for Q1:

Income Statement
Three months ended March 31, 2010
Operating Revenue	$92,888
Income from equity affiliates	$2,508
Other income	$68
Total Revenue	$95,464
Costs & Other Deductions:
Crude Oil	$49,496
P&M	$9,452
SG&A	$4,392
Depr & Dep	$3,253
Exploration Exp	$615
Int Exp	$93
Sales-Based Taxes	$7,577
Other Taxes	$9,694
Total	$84,572
Income before Taxes	$10,891
Income Taxes	$4,337
NI w/ NC Interests	$6,555
NI Attributed to NC Interests	$95
Net Income	$6,460
EPS	$1.37

   

Over the next couple of days, I will be posting Q2 revenue and EPS estimates, along with a 1-Year Price Target, so be on the look-out for that!

If you like what you’ve been reading, be sure to click “Follow” in the upper-right portion of your screen.  Also, I always encourage my readers to leave a comment (even anonymously) anytime they have something to say.

XOM Ownership

Author:   NO

Author’s Family:  NO

Disclaimer:
· Opinions, estimates and projections contained in this report are of the author as of the date published and are subject to change without notice.
· This report is not, nor should it be construed as, an offer to sell or solicitation of an offer to buy any securities.
· Unless otherwise noted, all research reports provide information of a general nature and do not address the circumstances of any particular investor.

Exxon Awaits Us

Hello all. Due to time constraints, I have decided not to analyze Texas Instruments this earnings season. Instead, I will be focusing on Exxon Mobil's earnings announcement due out before the bell on Thursday, April 29th. Be on the lookout for my estimates in the coming days...

                   

XOM Ownership

Author:   NO

Author’s Family:  NO

Disclaimer:
· Opinions, estimates and projections contained in this report are of the author as of the date published and are subject to change without notice.
· This report is not, nor should it be construed as, an offer to sell or solicitation of an offer to buy any securities.
· Unless otherwise noted, all research reports provide information of a general nature and do not address the circumstances of any particular investor.

The Sun Will Always Rise

eBay Second-Quarter Revisions

Here they are folks:

 Q2 Revenue:  $2.18 Bil

Q2 EPS (Adj):  $0.41

A strange thing happened today while I was working on these revisions.  I took a look back at the regression models I created to predict Q1 revenue.  We now know that actual revenue came in at $2.20 Bil.  Generally, the process that I employ to arrive at my revenue estimates, is to create multiple regression models and then determine which one best predicted the prior quarter’s sales.  In the case of my Q1 estimate, I decided to use two variations of first-order linear regression and one form of autoregression.  The interesting phenomenon that I previously alluded to occurred when I averaged the predictions of each of the five models that I previously created—the result was $2.195 Bil, or a difference of less than one half of a single percent from the actual Q1 revenue!  Why I did not realize this earlier is beyond me.  However, the good news is that I feel very strongly about the above Q2 revenue estimate of $2.18 Bil.  I am also confident that Q2 EPS will come in at $0.41.

Here is a table showing the Q2 revenue predictions from each of the five models I created for eBay:

Q2 Revenue Estimates
Model	Prediction
First-Order	$2,210,700
FO-CFO	$2,210,700
Deasonal	$2,203,423
Dummy	$2,193,097
Lagged	$2,098,321
Average	$2,183,248

Here are my line-by-line estimates for the second quarter:

Income Statement
Three months ended June 30, 2010
Revenue	$2,183,248
Cost of Revenue	$613,531
Gross Margin	$1,569,717
Operating Expenses:
R&D	$199,463
S&M	$462,957
G&A	$270,101
Provision for Loan Loss	$100,987
Amortization	$60,428
Restructuring	$12,000
Total	$1,105,936
Income from Operations	$463,781
Interest Income	$6,011
Income before Taxes	$469,792
Provision for Income Taxes	-$91,166
Net Income	$378,626
Shares Outstanding	1,336,000
EPS	$0.28
Net Income (Adj)	$551,626
EPS (Adj)	$0.41

So what does this mean for the investors and traders of eBay’s stock?  It means that there is a good chance that next quarter’s revenue will come in about $0.02 higher than the upper range of management's forecast.  However, as we all know, the whisper numbers are what really move stocks after earnings, and I would not be surprised if the market factors in an EPS of $0.41 by the next earnings announcement.  Similarly, when I reworked my valuation model, I came up with virtually the same price target—$23.11.  Now, I’ve given the readers a lot of information here so let me sum it all up with a buy/hold/sell recommendation.  Given that the market has already factored in a 6% correction since the earnings announcement, I am reaffirming my HOLD recommendation.  This concludes my analysis of eBay.

I still hope to have the estimates for Texas Instruments up over the weekend.  The company will report earnings after the bell on Monday. 

If you like what you’ve been reading over the past few weeks, I implore you to click “FOLLOW” in the upper-right portion of your screen.  Similarly, I always encourage my readers to leave me a comment (even anonymously) anytime they have something to say.

P.S.  Don’t forget that the day before eBay reported earnings, I wrote a post entitled “The Future Appears Cloudy for eBay.”  If you had heeded this warning, you could have either sold your long shares or shorted the stock. 

EBAY Ownership

Author:   NO

Author’s Family:  NO

Disclaimer:
· Opinions, estimates and projections contained in this report are of the author as of the date published and are subject to change without notice.
· This report is not, nor should it be construed as, an offer to sell or solicitation of an offer to buy any securities.
· Unless otherwise noted, all research reports provide information of a general nature and do not address the circumstances of any particular investor.