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Exxon Mobil Earnings Disappoint the Street But Please Shareholders

Despite oil’s average price of $103 per barrel for the quarter, today’s earnings announcement from Exxon Mobil (NYSE: XOM) didn’t match what analysts had expected for the quarter.

Exxon Mobil reported $2 in earnings per share, below consensus estimates of $2.11. On a net income basis, profits fell from $10.7 billion in the first quarter of last year to $9.45 billion this quarter.

The disappointment came largely from its upstream business (drilling and production) versus downstream business (transportation and refining), as it reports that the drilling and production of both oil and natural gas fell 7.7% and 3.4%, respectively.

While analysts’ expectations were not met, and the stock is down roughly 1% this morning, Exxon Mobil did raise its dividend payment 21% to $0.57 per share. That makes Exxon Mobil the biggest dividend payer in the world at $10.7 billion per year.

This quarter alone, Exxon Mobil spent $5 billion on share repurchases.

So while this earnings number may disappoint analysts and short-term traders, investors with the long view are likely pleased with Exxon’s management.

The most interesting information released was ExxonMobil’s gauge of the temperature of the economy as a whole…

Though everyone expected Europe’s economy to cool in the wake of its eurozone crisis, from Exxon Mobil’s perspective, the U.S., Asian and emerging market economies all stumbled. According to management, “Globally, growth slowed in the first quarter… The U.S. and Japanese economies are also expected to show declines from fourth-quarter levels.“

Bottom line: No matter what the short-term prospects are for oil and the economy, ExxonMobil’s diverse global presence and scale have allowed it to capture big projects like its Arctic joint-venture with Rosfneft. With the long-term view for energy intact, and management focused on returning value to shareholders, Exxon Mobil remains the safest “Buy” in oil and gas.

Ahead of the tape,

Matthew Weinschenk

Matthew Weinschenk