Q: Is ExxonMobil a good investment?
A: ExxonMobil (XOM)’s massive size has allowed it to handle the oil price implosion better than many of its peers. But that still doesn’t mean it’s a stock worth betting on.
Given how the price of oil has cratered 21% over the past year, the fact shares of the biggest U.S. oil company are essentially unchanged is somewhat impressive. Exxon shares have actually outperformed the Standard & Poor’s 500 over the past year, which has fallen 1.5%. On top of the relative safety of the stock, ExxonMobil is currently paying a dividend yield of 3.4%, which is higher than the roughly 2% yield of the market.
The company’s first-quarter results also offered some hope to investors. The company reported an adjusted profit of 43 cents a share in the first quarter, which topped expectations by 39%. Shares rose 37 cents, or 0.4%, to $88.40 on the news on Friday.
But here’s the problem. Adjusted profit is expected to fall by more than a third this year before bouncing back in 2017. Investors also know picking the bottom in oil prices — and oil stocks — is risky business. Analysts still rate Exxon a “hold” and think the stock will be worth $84.21 a share, or 5% lower than it is now.
USA TODAY markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at mkrantz@usatoday.com or on Twitter @mattkrantz.
