Oil prices are rising, and the global economy continues to recover from the worst financial crisis in decades. With those twin tailwinds, you’d think Big Oil stocks would be a no-brainer investment. Unfortunately, a pair of very disappointing earnings results from energy giants Exxon Mobil Corporation (NYSE:XOM) and Royal Dutch Shell plc (ADR) (NYSE:RDS.B) sent each stock significantly lower on a day in which the markets rallied more than 1% to set new all-time highs.
In the wake of disappointing results, should investors view the quarterly reports as one-offs for each company? Or, is this a harbinger of things to come for Big Oil?
Storm clouds as dark as crude oil
Exxon Mobil Corporation (NYSE:XOM) whiffed badly on earnings, representing the company’s biggest miss since 1999. There’s no sugarcoating the results, and investors are likely scratching their heads as to how such a powerful company could come up so woefully short.
All told, second-quarter net income fell a whopping 57% from the prior-year period, due to weaker refining results and lower production. Revenue fell 16% year over year, and the company’s $1.55 in per-share profits was the lowest EPS total since September 2010.
Meanwhile, Royal Dutch Shell plc (ADR) (NYSE:RDS.B) reported a 57% drop in its own quarterly net income. Shell’s problems were distinctly different from Exxon Mobil Corporation (NYSE:XOM)’s. Royal Dutch Shell plc (ADR) (NYSE:RDS.B) attributed its poor quarter to attacks on its operations in Nigeria, in addition to a significant write-down of its North American shale oil fields. Furthermore, production of oil and gas equivalents declined 1.3% from a year ago.
On a positive note, it should be mentioned that despite their big misses, Exxon Mobil Corporation (NYSE:XOM) and Royal Dutch Shell plc (ADR) (NYSE:RDS.B) are two very shareholder-friendly companies.
ExxonMobil increased its dividend by 21% in 2012 and then again by 11% early this year.
This year’s dividend bump represented the 31st consecutive annual dividend increase from Exxon Mobil Corporation (NYSE:XOM). According to the company, its dividend has grown by 6% compounded annually over the past 30 years.
Royal Dutch Shell plc (ADR) (NYSE:RDS.B)’s dividend yield is much higher, at nearly 5.5% annualized. And, it’s not as if the company’s payout is standing still. The stock recently increased its dividend by nearly 5%.
For investors who’d prefer to stick with an oil company firing on all cylinders, ConocoPhillips (NYSE:COP) handed in a quarterly report that clearly pleased the market more than its two rivals did.
ConocoPhillips (NYSE:COP)’s second-quarter earnings declined, but the results were higher than analyst estimates, and the company raised its production guidance for the year.
And, if you exclude special items, ConocoPhillips (NYSE:COP)’s adjusted earnings per share actually increased, to $1.41 per share from $1.19 per share year over year.