Investors Jittery About XOM's Outlook

For Rothbort's preview heading into the ExxonMobil conference call, please click here.

Despite the better-than-expected quarter, ExxonMobil (XOM - commentary - Cramer's Take) shares are selling off. Concerns for lower volumes due to declining demand and the rollover of the impact from the third-quarter hurricanes have investors a bit concerned for the outlook in the fourth quarter. I was not surprised by the weakness in the chemical business, but I was surprised by the better downstream margins.

Lately, ExxonMobil has traded with a high degree of volatility, acting more like a tech stock than an energy company. It has become a trading vehicle rather than an investment. I think that will change once this manic-depressive market returns to a sense of normality.

What would really get me excited about ExxonMobil is if the board doubled the dividend to 4% and cut back on the aggressive stock buybacks.

The company posted third-quarter 2008 EPS of $2.86 on revenue of $137.737 billion. Net income increased by $5.4 billion year over year, to $14.8 billion. Included was a special charge for the Valdez punitive damage award of $170 million.

ExxonMobil distributed $10.1 billion to shareholders during the quarter, composed of $2.1 billion in dividends and $8.0 billion in share buybacks.

As a result of this year's hurricanes, the Beaumont, Texas, chemical plant sustained extensive water damage. All upstream and downstream facilities are back online. Upstream volumes declined by 24,000 barrels of oil equivalent per day, and costs rose by $50 million. Damage repairs and lost volumes will reduce earnings by $500 million in the fourth quarter.

Upstream (production) earnings rose $3.1 billion year over year, to $9.4 billion. After tax, earnings came in at $28.28 per barrel. While total realizations increased by $4.4 billion, crude oil realizations rose $40 per barrel, to $111 per barrel, and natural gas realizations were up as well. Lower volumes reduced earnings by $1.3 billion, with crude oil and natural gas production volumes both declining 8% year over year and liquids production decreasing 4% year over year.

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At the time of publication, Rothbort had no positions in the stocks mentioned, although positions can change at any time.

Scott Rothbort has over 20 years of experience in the financial services industry. In 2002, Rothbort founded LakeView Asset Management, LLC, a registered investment advisor based in Millburn, N.J., which offers customized individually managed separate accounts, including proprietary long/short strategies to its high net worth clientele. He also is the founder and manager of the social networking educational Web site TheFinanceProfessor.com.

Immediately prior to that, Rothbort worked at Merrill Lynch for 10 years, where he was instrumental in building the global equity derivative business and managed the global equity swap business from its inception. Rothbort previously held international assignments in Tokyo, Hong Kong and London while working for Morgan Stanley and County NatWest Securities.

Rothbort holds an MBA in finance and international business from the Stern School of Business of New York University and a BS in economics and accounting from the Wharton School of Business of the University of Pennsylvania. He is a Term Professor of Finance and the Chief Market Strategist for the Stillman School of Business of Seton Hall University.

For more information about Scott Rothbort and LakeView Asset Management, LLC, visit the company's Web site at www.lakeviewasset.com. Scott appreciates your feedback; click here to send him an email.