Exxon Mobil Shares Regaining Strength
Since we told our readers on June 8th Exxon Mobil is Not BP - Trade on Weakness, Exxon Mobil Corp. (NYSE:XOM) shares have moved up 6.4%. Exxon's stock price was being punished for BP's (NYSE:BP) disaster, but traders have been taking note.
EXXON IS NOT BP
Exxon Mobil (XOM) volunteered to pay Alaskans, as well as businesses $300 million right away after their oil spill. Courts ended up ordering Exxon Mobil to pay an additional $25 million to some groups that had been overlooked. The total amount that the U.S. Supreme court ordered Exxon Mobil to pay was $507 million, plus interest in the amount of $470 million in 2009. Keep in mind it took 20 years for Exxon's litigations to end, BP is just getting started and their costs have yet to be determined but its likely to be in the billions.
BP has already paid out 18,000 of the 36,000 claims that have been filed against them, totaling close to $48 million. BP is focusing on the claims whose livelihoods have been effected. As well as the families of the 11 victims who died and the additional 17 people who were injured.
Exxon Mobil has been through this mess before and BP may not survive as a company, but guess who will? Exxon Mobil. This week Exxon Mobil announced that Fitch Ratings has affirmed the company a Default Rating (IDR) at AAA; Senior unsecured debt at AAA; Commercial paper at F1+; Short term IDR at F1+; The Rating Outlook is Stable.
Ryan Fuhrmann from StreetAuthority.com said this week about XOM:
Near-term prospects at Exxon Mobil (XOM) have been dented by the oil spill in the Gulf of Mexico, but has become an even more compelling investment play in the longer term. The stock was already undervalued but will benefit from higher oil prices, as well as the potential demise of archrival BP.
Annual profit growth in the double digits during the coming decade could be challenging, but if Exxon Mobil can manage to grow +10% during the next five years, then the stock could be undervalued by at least -30%. This isn't an overly high hurdle given oil and natural gas prices are arguably depressed along with global economic activity.
CHARTS FOR XOM:
Disclaimer: No positions in any of the securities mentioned in this publication.