Oil and gas giant Exxon Mobil ( XOM ) is scheduled to release its fourth-quarter numbers before the market open on January 31. Analysts expect earnings of $0.72 per share, up from $0.67 during the same period last year. The stock has appreciated 13.1% over the last 12 months.
XOM was recently trading at $85.19, down $10.36 from its 12-month high and $11.64 above its 12-month low. Overall technical indicators for XOM are neutral, and the stock is in a weak downward trend. The stock has recent support above $84.60, and recent resistance below $88.25. Of the 16 analysts who cover the stock, two rate it a "strong buy", one rates it a "buy", 10 rate it a "hold", and three rate it a "strong sell". The stock receives S&P Capital IQ's 3 STARS "Hold" ranking.
Oil prices recovered nicely in 2016, but at this point most analysts believe that prices will remain pretty range bound around $55 a barrel through the current year. OPEC and non-OPEC nations recently reached a production agreement, which could drive prices higher, but there is a lot of skepticism as to whether or not they will actually follow through on the deal. XOM shares enjoyed major gains during the first half of last year, but have been pretty range-bound since late summer. Earnings have been falling, but analysts believe this will be the quarter that the trend finally reverses, with earnings rising 7.4% year over year. Chevron ( CVX ) has already reported its quarterly numbers, with that company turning a profit, versus a loss last year, but the results were well below analysts' estimates, and the stock took a hit. Wall Street was obviously overly optimistic regarding how much CVX could earn with oil prices rising, and there is the risk that they were too optimistic with XOM as well. The stock has a P/E of 39.9, but shares will still rise if the company is able to hit the estimate, but the valuation is high enough to justify a decent drop in share price if Exxon follow's Chevron's example with a disappointing report. I would not add to any positions at this point, and would make sure any new long position would be hedged and have a decent amount of downside protection.
Stock Only Trade
If you want a bullish hedged trade on the stock, consider an April 70/75 bull-put credit spread for a 20-cent credit. That's a potential 4.2% return (18.1% annualized*) and the stock would have to fall 11.7% to cause a problem.
If you want to take a bearish stance on the stock at this time, consider a June 92.50/97.50 bear-call credit spread for a $0.40 credit. That's a potential 8.7% return (22.7% annualized*) and the stock would have to rise 9.0% to cause a problem.
Covered Call Trade
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Originally published on InvestorsObserver.com