Can Exxon Mobil Corporation (XOM) Stock Move Forward From Here?

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The oil markets needed a miracle, and then-presidential candidate Donald Trump delivered "bigly." After his remarkable win last year, Exxon Mobil Corporation (NYSE: XOM ) shook off its sideways consolidation pattern. From election night to the end of 2016, XOM stock gained nearly 6%. More importantly, it set the tone for an optimistic new year.

Can Exxon Mobil Corporation (XOM) Stock Move Forward From Here?

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Unfortunately, that potential hasn't panned out. Year-to-date, Exxon Mobil is off nearly 11%. Worryingly, its "Big Oil" peers are shedding even more blood. Perennial rival Chevron Corporation (NYSE: CVX ) is down roughly 10%, while ConocoPhillips (NYSE: COP ) was hit hard, tripping nearly 11%.

The primary culprit is the price of oil. The international benchmark Brent Crude is down nearly 16% YTD. West Texas Intermediate is close behind at -15.5% YTD.

Obviously, the persistently bearish oil indices have done no favors for XOM stock and other fossil fuel-related investments. However, the forcing of tighter financial controls among the oil market survivors was thought to have made the industry stronger overall. In addition, Exxon Mobil and its elite peers have broadly diversified businesses to offset losses in any one sector.

Confidence towards future profitability, though, remains the biggest hurdle for XOM stock. Not only are oil markets weak, if OPEC cannot cut production further, "black gold" will remain pressured. That puts Middle Eastern nations in a quandary . If they cut production, burgeoning U.S. energy production companies will steal market share. If they resume business as usual, global demand can't pick up the additional supply.

This is the decidedly complex backdrop of the upcoming Exxon Mobil earnings report.

Can XOM Stock Please Accountants and Analysts?

Despite serious questions about energy investments, Wall Street is optimistic on paper about XOM stock. For the second quarter of fiscal 2017, consensus estimates peg Exxon earnings-per-share to come in at 84 cents. This is a 20 cent increase over the year-ago Q2. At that time, the oil giant badly missed with a negative earnings surprise of 36%.

Given that the last three sequential quarters beat the Street's expectations - average positive surprise was 16% - analysts feel justified in their bullishness. Notably, profitability margins are up significantly from one year ago, which bolsters the case for a strong Exxon earnings beat.

On the revenue side, analysts estimate sales between $58.4 billion to $68 billion, with a consensus target of $62.5 billion. Over the last five quarters, sales have increased sequentially an average of 7%. So long as there are no hiccups, XOM stock should be able to hit this target.

Where doubts linger is in the guidance. OPEC threats to curb the oil supply glut have not been nearly as effective as advertised. Ironically, President Trump takes part of the "blame." In his quest to make America great again, he heavily supported energy independence. The President largely nullified OPEC, but in doing so, he's not necessarily helping XOM stock investors.

Complicating matters is that all signs point towards a robust Exxon earnings report. The issue is how the markets will interpret future growth opportunities. A very real possibility exists that oil companies must continue their cost-cutting initiatives. If so, I can't imagine the markets will be too happy to hear that, and may punish XOM stock.

Dark Clouds Persist Over Exxon Mobil

Finally, Exxon Mobil isn't doing itself any favors with its recent, politically charged controversy. The U.S. Treasury Department hit XOM with a $2 million fine . An alleged disregard for American sanctions against Russia prompted the penalty.

The matter normally wouldn't stand out were it not for the fact that current Secretary of State Rex Tillerson was Exxon's CEO at the time the alleged infractions were committed.

Naturally, the issue is a distraction for President Trump and Exxon Mobil execs. But where it impacts XOM stock is in shareholder perception. Russia isn't exactly our most stable international partner. Becoming over-levered towards our historical and ideological rival is not the brightest business strategy. The inability (or the deliberate apathy) to see negative implications is something that the markets will mull over.

Ultimately, the upcoming Exxon earnings report is all about context. On paper, XOM stock should hit or exceed several key metrics. But the underlying oil sector is a big problem. Without substantive moves forward - or the hope of such - it's difficult to envision the markets responding well.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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