Transcripts

ExxonMobil's Stock Slides Despite $11B Profit

SUSIE GHARIB: ExxonMobil reported a massive quarterly profit today, nearly $11 billion. But the results disappointed investors and the company's stock tumbled more than 3.5 percent. Thanks to record crude oil prices, the world's biggest oil company earned $2.03 a share in the first quarter, up from $1.62 a year ago, but $0.11 below analysts' expectations. Revenue surged 33 percent to nearly $117 billion, but that figure also fell short of forecasts. Suzanne Pratt takes a look behind the numbers.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: ExxonMobil's $11 billion profit in the first three months of this year certainly seems impressive. On Wall Street, however, that achievement fell short of lofty expectations. Crude oil prices were up 70 percent in the first quarter over last year and gasoline prices also reached new highs. But earnings growth at Exxon is lagging behind, gaining only 17 percent in the first quarter. Consumers and investors may wonder, how is that possible? Edward Jones analyst Brian Youngberg says big oil companies can't fully benefit from a big jump in oil prices.

BRIAN YOUNGBERG, SR. ENERGY ANALYST, EDWARD JONES: Their costs are going up. Sharing agreements reduces the impact there and also on the refining side. They are just not going to make as much money for every dollar that oil goes up as people would really think.

PRATT: In the case of Exxon, a nearly 6 percent drop in oil and gas production also hurt first quarter profits. Nevertheless, Exxon is sitting on about $40 billion in cash and is likely to earn billions more this year. What Exxon does with that money is sparking criticism from Wall Street to Washington. The company plans at least a 20 percent increase in spending on capital and exploration projects this year to $25 billion. Historically, however, it has put less money back into the company than its rivals. Yesterday, Exxon upped its dividend by 14 percent and today, it revealed additional hefty spending on stock buybacks made in the first quarter.

YOUNGBERG: ExxonMobil is buying back at least two times the level of shares each year than any of their peers and that has been a criticism of ExxonMobil in the last two or three years. I do not see that slowing down anytime soon.

PRATT: Investors are supposed to like stock buybacks, but Exxon shares are up only 11 percent in the last year and flat so far this year. Oppenheimer analyst Fadel Gheit, who personally owns Exxon stock, says investors see better opportunity elsewhere.

FADEL GHEIT, OIL &GAS ANALYST, OPPENHEIMER: Investors usually focus on the smaller companies, independent oil and gas producing companies that have no exposure to the refining and marketing business, which has been volatile and has been hurting the companies in the last year or so.

PRATT: Chevron will report its first quarter results tomorrow. Analysts are looking for a 30 percent jump in profits. That would put Chevron in the middle of the pack of its peers, but nicely ahead of Exxon's disappointing performance. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.