July 28, 2012
Exxon Mobil Corp.
XOM-US USD 85.24
Industry Group:
52 Week Range:
Market Cap:
Integrated Oil
USD 67.03 - USD 87.94
USD 398,596.00 Mil.
Company numbers are TTM (trailing twelve months) or latest
available. Share price data is previous day's close unless
otherwise stated.
Overview
Data as of Last Available Filing
Annual:
Semi Annual:
Quarterly:
2011-12-31
N/A
2012-03-31
Peer Group
Royal Dutch Shell PLC (CL B) (RDSB-GB)
Chevron Corp. (CVX-US)
BP PLC ADS (BP-US)
Total S.A. ADS (TOT-US)
China Petroleum & Chemical Corp. (386-HK)
Occidental Petroleum Corp. (OXY-US)
ConocoPhillips (COP-US)
Exxon Mobil Corp. (XOM-US)
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•
Exxon Mobil Corp. currently trades at a higher
Price/Book ratio (2.5) than its peer median (1.2).
•
XOM-US outperforms its peers with a relatively
high operating performance and the market also
expects faster growth relative to its peers
•
XOM-US has relatively high profit margins while
operating with median asset turns.
•
Compared with its chosen peers, changes in
the company's annual earnings are better than
the changes in its revenue, implying better than
median cost control and/or some economies of
scale.
•
XOM-US's return on assets currently and over
the past five years suggest that its relatively high
operating returns are sustainable.
•
The company's relatively high gross margin
suggests some differentiation with pricing
advantages versus peers.
•
While XOM-US's revenues growth has been
around the peer median in recent years, the
market seems to see faster growth ahead and
gives its shares a higher than peer median PE
ratio.
•
The company's level of capital investment seems
appropriate to support the company's growth.
•
XOM-US has the financial and operating capacity
to borrow quickly.
Exxon Mobil Corp. | Fundamental Analysis | July 28, 2012
1
Share Price Performance
Relative outperformance over the last year has faded more recently.
XOM-US's change in share price of 0.8% for the last 12 months is better than its peer median. However, the 30day trend in its share price performance of 4.9% is now around the peer median suggesting that the company's
recent performance has faded relative to peers.
Share Price Performance
Share Price % Change:1 2 months
Fading
XOM- US
RDSB- GB
0
Leading
CVX- US
COP- US
- 10
386- HK
BP- US
- 20
OXY- US
TOT- US
Lagging
- 30
0
Rising
2.5
5
7.5
Share Price % Change:3 0 days
Share Price Perform ance
Peer Median 30 Day Share Price Change %
Peer Median 12 Month Share Price Change %
Drivers of Valuation: Operations or Expectations?
Valuation (P/B) = Operating Advantage (ROE) * Growth Expectations (P/E)
Price/Book or P/B valuation is a function of the observed operating performance of the company as measured by
ROE multiplied by the market's current implied growth expectation as measured by the P/E. We define Valuation
Premium as the difference between the Market Capitalization and Book Value of Equity, and as a proxy for the
NPV of cash-flow associated to the Book Equity investment.
Based on the analysis of the relative contribution to the P/B valuation of "Operations ROE" vs. "Expectations P/E",
we quickly garner insight into peers comparative performance and the market's assessment of their strategies are they just "Harvesting" the current business pipeline or are investors betting on a strategic "Turnaround"?
XOM-US has an Outperforming profile relative to peers.
XOM-US achieved a better operating performance than the median of its chosen peers (ROE of 25.8% compared
to the peer median ROE of 18.6%) and the market still expects faster growth from it than from those peers (PE of
10.3 compared to peer median of 7.1). The company currently trades at a higher Price/Book ratio of 2.5 compared
to its peer median of 1.2.
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Exxon Mobil Corp. | Fundamental Analysis | July 28, 2012
2
Valuation Drivers
Operating Advantage: ROE %
Harvesting
Outperforming
XOM- US
BP- US
25
20
CVX- US
OXY- US
RDSB- GB
TOTCOP-US
US
386- HK
15
10
Challenged
5
Turnaround
4
6
8
10
Growth Advantage: P/ E
Valuation Drivers
Peer Median P/ E
Peer Median ROE %
XOM-US has maintained its Outperforming profile from the recent year-end.
XOM-US's ROE is less than (but within one standard deviation of) its five-year average ROE of 28.2%. Though its
ROE decreased to 25.8% from 27.3% (in 2011), its peer median remained relatively stable during this period at
18.6%. Relative to peers, ROE fell 1.1 percentage points.
XOM-US's current PE is less than its average year-end PE of 11.9 over the last five year-ends. PE increased to
10.3 from 9.8 (at recent year-end 2011) unlike its peer median, which decreased during this period to 7.1 from
7.9. Combining both ROE and PE suggests that XOM-US's current PB (price/book) of 2.5 is less than its average
year-end PB of 3.1 over the last five year-ends.
ROE % (On Common Equity)
Price To Earnings
15
30
12.5
10
20
7.5
10
2007
2008
2009
XOM- US
2010
2011
Peer Median
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TTM
5
2007
2008
2009
XOM- US
2010
2011
TTM
Peer Median
Exxon Mobil Corp. | Fundamental Analysis | July 28, 2012
3
Operations Diagnostic
XOM-US has relatively high profit margins while operating with median asset turns.
The company attempts to achieve high profit margins (currently 9.0% vs. peer median of 6.7%) through
differentiated products. It currently operates with peer median asset turns of 1.3x.
Operating Advantage
Asset Efficiency: Sales/ Total Assets
2.5
Volume
386- HKDriven
Dominant
2
COP- US
RDSBGB
BP- US
XOM- US
1.5
TOT- US
CVX- US
1
OXY- US
0.5
Problematic
0
Margin Driven
5
10
15
20
25
30
Net Margin %: NI/ Sales
Operating Advantage
Peer Median Net Margin %
Peer Median Sales/ Total Assets (x )
XOM-US has maintained its relatively high net margin profile from the recent year-end.
XOM-US's net margin is similar to its five-year average net margin of 9.5%. Like its asset turnover trend, net
margin has remained relatively stable for both the company (9.0%) and the peer median (6.7%) relative to 2011.
XOM-US's asset turnover is similar to its five-year average asset turnover of 1.4. Compared to 2011, asset
turnover has remained relatively stable for both the company (1.3) and the peer median (1.3). Overall, asset
turnover and net margin trends suggest that XOM-US's ROA at 12.0% is less than (but within one standard
deviation of) its five-year average ROA of 13.9%.
Net Margin %
Sales/ Total Assets (x )
12
2
1.5
10
1
8
0.5
6
2007
2008
2009
XOM- US
2010
2011
Peer Median
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TTM
0
2007
2008
2009
XOM- US
2010
2011
TTM
Peer Median
Exxon Mobil Corp. | Fundamental Analysis | July 28, 2012
4
Earnings Leverage
XOM-US has achieved relatively better changes in earnings than in revenues.
Changes in the company's revenues are in-line with its peers (annual revenue changed by 26.9%) but its earnings
performance has been better -- its annual earnings changed by 34.8% compared to the peer median of 28.9%,
implying that it has better cost control relative to its peers. XOM-US currently converts every 1% of change in
revenue into 1.3% of change in annual reported earnings.
Earnings Leverage
Earnings Focus
RDSB- GBOXY- US
CVX- US
XOM- US
TOT- US
COP- US
Earnings Growth %: YoY
50
Leader
386- HK
0
- 50
- 100
BP- US
Laggard
- 150
Revenue Focus
20
30
40
Revenue Growth %: YoY
Earnings Leverage
Peer Median Revenue Growth (% YOY)
Peer Median Earnings Growth (% YOY)
Sustainability of Returns
XOM-US's relative returns suggest sustainable outperformance.
XOM-US's return on assets is above its peer median both in the current period (12.0% vs. peer median 8.7%)
and also over the past five years (13.9% vs. peer median 8.5%). This performance suggests that the company's
relatively high operating returns are sustainable.
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Exxon Mobil Corp. | Fundamental Analysis | July 28, 2012
5
Sustainable Operating Advantage
15
Eroding
Sustainable
XOMUS
ROA %: 5 Year Avg
12.5
OXY- US
10
CVX- US
TOT- US
RDSB- GB
386- HK
7.5
BP- US
5
COP- US
2.5
Questionable
0
Improving
5
7.5
10
12.5
ROA %: Latest
Sustainable Operating Advantage
Peer Median 5Y ROA %
Peer Median 1Y ROA %
Drivers of Margin
Relatively high gross margin suggests some differentiation with pricing advantages.
The company's comparatively high gross margin of 28.0% versus peer median of 22.2% suggests that it has a
differentiated strategy with pricing advantages. However, XOM-US's pre-tax margin of 12.7% is around the peer
median which, combined with the healthy gross margin, suggests higher operating costs relative to peers.
Drivers of Margins
Differentiation (Gross Margin%)
Differentiated; High Cost
Differentiated; Low
OXY-Cost
US
60
40
CVX- US
XOM- US
TOT- US
20
COP- US
US GB
386- HKBPRDSB-
Commodity; High Cost
0
10
Commodity; Low Cost
20
30
40
Cost Controls (Pre Tax Margin%)
Margin Drivers
Peer Median Pre- Tax Margin %
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Peer Median Gross Margin %
Exxon Mobil Corp. | Fundamental Analysis | July 28, 2012
6
XOM-US has maintained its relatively high gross margin profile from the recent year-end.
XOM-US's gross margin is its lowest relative to the last five years and compares to a high of 35.1% in 2007. While
its gross margin decreased to 28.0% from 28.8% (in 2011), its peer median increased during this period to 22.2%
from 17.5%. Gross margin fell 5.5 percentage points relative to peers.
XOM-US's pre-tax margin is less than (but within one standard deviation of) its five-year average pre-tax margin
of 14.0%. The decrease in its pre-tax margin to 12.7% from 13.4% (in 2011) was also accompanied by a
decrease in its peer median during this period to 11.1% from 11.7%.
Gross Margin %
Pre- Tax Margin %
35
17.5
30
15
25
12.5
20
10
15
2007
2008
2009
XOM- US
2010
2011
TTM
7.5
2007
2008
Peer Median
2009
XOM- US
2010
2011
TTM
Peer Median
Growth Expectations
The market is likely factoring in some chance for growth improvement.
While XOM-US's revenues growth has been around the peer median in recent years (16.3% vs. 16.2%
respectively for the past three years), the market gives its shares a higher than peer median PE ratio of 10.3. The
market seems to see faster growth ahead.
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Exxon Mobil Corp. | Fundamental Analysis | July 28, 2012
7
Historical Growth: 3 Year Revenue Growth %
Growth Ex pectations
Ex pected Decline
COP- US
20
Superior
386- HK
RDSB- GB
XOMOXYUS US
TOT- US
CVX- US
10
0
BP- US
Substandard
- 10
Strategic Play
4
6
8
10
Investor Ex pectations: P/ E
Growth Ex pectations
Peer Median P/ E
Peer Median 3Y Revenue Growth (CAGR %)
Capital Investment Strategy
XOM-US's level of capital investment seems appropriate given the company's growth.
XOM-US's annualized rate of change in the capital of 12.6% over the past three years is higher than its peer
median of 8.2%. This investment has generated an above peer median return on capital of 20.3% over the same
three years. Evidently, the relatively high capital investment was successful given the the relatively strong growth
in its returns.
Capital Investment Strategy
XOMUS
Supporting
Growth
Milking the Business
20
ROIC %: 3 Year Avg
CVX- US
BP- US
15
OXY- US
TOT- US
COP- US
RDSB- GB
386- HK
10
5
Maintenance Mode
0
Betting on Future
0
5
10
Capital Growth % (3 Year)
Capex Strategy
Peer Median 3Y Capital Growth (CAGR %)
Peer Median 3Y Average ROIC %
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Exxon Mobil Corp. | Fundamental Analysis | July 28, 2012
8
Leverage & Liquidity
XOM-US has the financial and operating capacity to borrow quickly.
With debt at a relatively low 2.7% of its enterprise value compared to an overall benchmark of 25% (Note: The
peer median is currently 10.9%), and a well-cushioned interest coverage level of 162.1x, XOM-US can probably
borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt. All 7
peers for the company have an outstanding debt balance.
Borrowing Capacity
Liquidity: EBIT/ Interest Ex pense (x )
750
Quick
CVX- USand Able
Some Capacity
500
250
XOM- US
OXY- US
RDSB- GBCOPBP-TOTUS US
386HK
0
Limited Flex ibility
- 250
0
10
Constrained
20
30
40
50
Leverage: Debt/ Enterprise Value (%)
Debt Capacity
Leverage Threshold
Interest Coverage Threshold
XOM-US has maintained its Quick & Able profile from the recent year-end.
XOM-US's interest coverage is its highest relative to the last five years and compares to a low of 27.0x in 2009.
While its interest coverage increased to 162.1x from 64.4x (in 2011), its peer median decreased during this period
to 29.1x from 34.0x. Interest coverage rose 102.5 points relative to peers.
XOM-US's debt-EV is similar to last year's high of 3.0%, which compares to a low of 1.6% in 2007. Though its
debt-EV has remained relatively stable at 2.7% compared to 2011, its peer median has increased to 10.9% from
9.9% during this period. Relative to peers, debt-EV fell 1.2 percentage points.
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Exxon Mobil Corp. | Fundamental Analysis | July 28, 2012
9
Interest Coverage (x )
Debt to Enterprise Value %
30
150
20
100
10
50
0
2007
2008
XOM- US
2009
2010
Peer Median
2011
TTM
0
2007
Threshold (2.5x )
2008
XOM- US
2009
2010
Peer Median
2011
TTM
Threshold (25%)
Key Valuation Items
Market Cap(mn)
Price / Book
Price / Earnings
Dividend Yield
(%)
Royal Dutch Shell PLC (CL B)
222,812.2
1.3
7.3
4.7
Chevron Corp.
209,275.0
1.7
7.8
3.0
BP PLC ADS
126,135.0
1.2
5.3
4.3
Total S.A. ADS
95,927.5
1.0
5.8
6.0
China Petroleum & Chemical Corp.
75,649.8
1.0
6.9
4.0
Occidental Petroleum Corp.
67,740.4
1.7
10.0
2.3
ConocoPhillips
67,325.0
1.0
5.9
4.7
Exxon Mobil Corp.
398,596.0
2.5
10.3
2.3
Peer Median
111,031.3
1.2
7.1
4.2
Best In Class
398,596.0
2.5
10.3
6.0
Revenues (mn) Gross Margin (%)
Pre-Tax Margin
(%)
Net Margin (%)
Company
Revenues & Margins
Company
Royal Dutch Shell PLC (CL B)
480,328.7
15.1
9.4
6.4
Chevron Corp.
238,878.0
34.1
18.0
11.4
BP PLC ADS
370,190.6
16.7
8.3
6.4
Total S.A. ADS
237,217.6
25.0
15.4
7.0
China Petroleum & Chemical Corp.
381,230.2
15.3
4.1
3.0
24,559.0
68.3
43.5
27.7
ConocoPhillips
244,563.0
19.4
8.0
5.0
Exxon Mobil Corp.
442,887.0
28.0
12.7
9.0
Peer Median
307,376.8
22.2
11.1
6.7
Best In Class
480,328.7
68.3
43.5
27.7
Occidental Petroleum Corp.
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Exxon Mobil Corp. | Fundamental Analysis | July 28, 2012 10
Key Assets (% of Revenues)
Capital (%)
Goodwill &
Intangibles(%)
Working Capital
(%)
Cash &
Equivalents (%)
Royal Dutch Shell PLC (CL B)
44.2
0.9
3.8
3.1
Chevron Corp.
56.4
1.9
8.1
8.3
BP PLC ADS
41.8
8.5
0.1
5.9
Total S.A. ADS
57.8
7.4
10.7
8.3
China Petroleum & Chemical Corp.
29.5
0.3
(3.6)
1.1
181.7
0.0
10.4
15.3
ConocoPhillips
38.8
1.7
1.4
4.2
Exxon Mobil Corp.
39.0
N/A
(0.6)
4.3
Inventory DSO Receivable DSO
Payable DSO
Cash Conversion
Cycle*
Company
Occidental Petroleum Corp.
Key Working Capital Items
Company
Royal Dutch Shell PLC (CL B)
24.3
60.9
49.9
67.4
9.8
37.0
34.1
22.0
BP PLC ADS
26.7
41.8
51.1
(10.4)
Total S.A. ADS
37.4
63.8
45.3
106.8
China Petroleum & Chemical Corp.
26.9
11.4
23.8
14.5
Occidental Petroleum Corp.
17.2
82.5
80.4
25.0
8.0
26.8
30.7
(8.3)
Exxon Mobil Corp.
12.3
30.7
38.3
(18.4)
Peer Median
20.8
39.4
41.8
18.2
Best In Class
8.0
11.4
80.4
(18.4)
Chevron Corp.
ConocoPhillips
* Inventory DSO + Receivable DSO - Payable DSO
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Exxon Mobil Corp. | Fundamental Analysis | July 28, 2012 11
Cash Management Indicators
Company
Current Assets
DSO
Current
Cash Float DSO*
Liabilities DSO
Excess Cash
DSO**
Royal Dutch Shell PLC (CL B)
97.1
83.3
15.7
2.8
Chevron Corp.
81.0
51.6
2.4
23.1
BP PLC ADS
83.5
83.2
(52.9)
15.4
137.7
98.6
24.1
22.6
44.9
58.1
(16.7)
(3.8)
167.8
130.0
(1.7)
48.7
ConocoPhillips
54.2
49.0
(44.4)
5.1
Exxon Mobil Corp.
61.1
63.3
(66.9)
6.0
Peer Median
82.3
73.3
(9.2)
10.7
Best In Class
44.9
130.0
(66.9)
(3.8)
Debt/Enterprise
Value (%)
Current Ratio
Interest
Coverage (x)
Cash Flow To
Total Debt (%)
Royal Dutch Shell PLC (CL B)
8.2
1.2
28.0
115.9
Chevron Corp.
3.5
1.6
696.5
412.9
BP PLC ADS
14.2
1.1
22.7
86.5
Total S.A. ADS
16.1
1.4
30.3
70.6
China Petroleum & Chemical Corp.
16.5
0.8
6.3
64.8
5.7
1.5
96.9
207.5
13.5
1.0
20.3
79.0
2.7
1.0
162.1
342.0
Peer Median
10.9
1.1
29.1
101.2
Best In Class
2.7
1.6
696.5
412.9
Operating Cash
Flow (%)
Capex (%)
Interest Expense
(%)
Dividends (%)
8.5
6.0
0.3
1.4
16.6
11.6
0.0
2.6
4.7
4.8
0.3
0.7
11.1
8.9
0.4
3.0
6.1
5.8
0.4
0.8
52.2
35.0
0.5
5.8
8.9
6.0
0.4
1.5
13.0
7.2
0.1
2.0
Total S.A. ADS
China Petroleum & Chemical Corp.
Occidental Petroleum Corp.
* CurrAssetsDSO - CurrLiabDSO - CashDSO
** Excess Cash = Cash & Eqvts - 2%*Revenue
Key Liquidity Items
Company
Occidental Petroleum Corp.
ConocoPhillips
Exxon Mobil Corp.
Key Cash Flow Items (% of Revenues)
Company
Royal Dutch Shell PLC (CL B)
Chevron Corp.
BP PLC ADS
Total S.A. ADS
China Petroleum & Chemical Corp.
Occidental Petroleum Corp.
ConocoPhillips
Exxon Mobil Corp.
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Exxon Mobil Corp. | Fundamental Analysis | July 28, 2012 12
Company Profile
Exxon Mobil Corp. engages in the exploration and production of natural gas and crude oil. Its principal business
is energy, involving exploration for production of, crude oil and natural gas, manufacture of petroleum products
and transportation and sale of crude oil, natural gas and petroleum products. ExxonMobil is a manufacturer and
marketer of commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics and
a wide variety of specialty products. It also has interests in electric power generation facilities. Exxon Mobil has
several divisions and hundreds of affiliates that include ExxonMobil, Exxon, Esso and Mobil. It operates through
three reportable business segments: Upstream, Downstream and Chemical. The Upstream segment is organized
and operates to explore for and produce crude oil and natural gas. The Downstream segment is organized
and operates to manufacture and sell petroleum products. It encompasses global network of manufacturing
plants, transportation systems, and distribution centers provides fuels, lubricants, and other high-value products
and feedstocks to customers. The Chemical segment is organized and operates to manufacture and sell
petrochemicals. It business supplies olefins, polyolefins, aromatics, and a wide variety of other petrochemicals.
The company was founded by John D. Rockefeller in 1882 and is headquartered in Irving, TX.
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Exxon Mobil Corp. | Fundamental Analysis | July 28, 2012 13