Zacks Analyst Blog Highlights: ExxonMobil, ConocoPhillips, Chevron, U.S. Bancorp and JPMorgan Chase

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Feb 01, 2011, 09:30 ET

CHICAGO, Feb. 1, 2011 /PRNewswire/ -- Zacks.com Analyst Blog features: ExxonMobil Corp. (NYSE: XOM), ConocoPhillips (NYSE: COP), Chevron Corp. (NYSE: CVX), U.S. Bancorp (NYSE: USB) and JPMorgan Chase & Co. (NYSE: JPM).

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Here are highlights from Monday's Analyst Blog:

ExxonMobil Tops, Profit Soars

ExxonMobil Corp.'s (NYSE: XOM) fourth quarter earnings shot up 53% year over year, driven by higher commodity price realizations, improved refinery margins and solid chemical contributions.

The world's largest publicly traded oil company posted earnings of $1.85 per share, substantially beating the Zacks Consensus Estimate of $1.62 and year-earlier earnings of $1.27. Full-year 2010 earnings were up 55% from the year-earlier level at $6.22 per share, well above the Zacks Consensus Estimate of $5.98.

Total revenue in the quarter increased more than 17% year over year to $105.2 billion, easily surpassing the Zacks Consensus Estimate of $93.6 billion. Full-year revenue came in at $383.2 billion (up more than 23% year over year), ahead of the Zacks Consensus Estimate of $371.9 billion.

Recently, ConocoPhillips (NYSE: COP) and Chevron Corp. (NYSE: CVX) also beat our estimates on the back of strong commodity prices and improved U.S. refining margins. All these emphasize a strong market trend.

Importantly, Exxon has returned $19 billion to shareholders as dividends and share buybacks in 2010.

Operational Performance

The improved production and increased oil price realizations led to a 53% hike in earnings from the year-earlier quarter to reach $9.25 billion. Upstream earnings were about 29% higher from the year-earlier quarter at $7.48 billion.

The production of oil and natural gas averaged 4.97 million oil equivalent barrels per day (50.9% liquids), up nearly 19% year over year. When adjusted for the impact of entitlement volumes and OPEC quota restrictions, production was up about 18%.

Exxon's refinery throughput averaged 5.30 million barrels per day, down 1.5% from the year-earlier level. Total refined product sales of 6.56 million barrels per day were up 1% year over year. Total product sales in the Chemicals business segment decreased 4.9% year over year to $6.35 billion.

Total Downstream earnings in the quarter were $1.15 billion, including $226 million from domestic operations. Chemical earnings were $1.07 billion, up 49% from the year-earlier earnings.

Cash flow from operations and asset sales totaled $14.7 billion in the reported quarter. Capital expenditures totaled $10.1 billion, up 22% year over year.

Outlook

While production volumes in the reported quarter increased significantly, we believe that it will further augment next year through the joint venture agreement that was signed with Qatar Petroleum to progress the Barzan Project. Further, Fayetteville shale assets of Petrohawk Energy as well as expansion of the carbon dioxide capture plant at LaBarge facility are also expected to boost future volume growth.

ExxonMobil is the best-run integrated oil company in the world given its track record of superior return on capital employed. As the largest publicly traded oil company, ExxonMobil has long been a core holding for investors seeking a defensive name with continued dividend growth. However, as access to new energy resources becomes more difficult, ExxonMobil, like most of its peers, will face headwinds to replace its reserve.

The company holds a Zacks #3 Rank, which is equivalent to a short-term Hold rating. We also maintained our long-term Neutral recommendation on the stock.

11 Bank Failures in '11

The ongoing economic volatility took its toll on a few more banks last week. On Friday, four more were padlocked by U.S. regulators. These banks were based in Oklahoma, Wisconsin, Colorado and New Mexico. This takes the total number of bank failures to 11 so far in 2011, following 157 in 2010, 140 in 2009 and just 25 in 2008.

While the bigger banks benefited greatly from the various programs launched by the government, many smaller banks continue to struggle. Tumbling home prices, soaring loan defaults and a high unemployment rate continue to overshadow such institutions.

With the industry absorbing bad loans offered during the credit explosion, the banking system is exposed to some severe problems. This is aggravating the risk of bank failures.

The failed banks are:

Camargo, Oklahoma-based The First State Bank, with total assets of about $43.5 million and total deposits of about $40.3 million as of September 30, 2010.
Stoughton, Wisconsin-based Evergreen State Bank, with about $246.5 million in total assets and $195.2 million in total deposits as of September 30, 2010.
Louisville, Colorado-based Firs Tier Bank, with total assets of about $781.5 million and total deposits of about $722.8 million as of September 30, 2010.
Taos, New Mexico-based First Community Bank, with total assets of about $2.31 billion and total deposits of about $1.94 billion as of September 30, 2010.

These bank failures represent another blow to the Federal Deposit Insurance Corporation (FDIC) fund meant for protecting customer accounts, as it has been appointed receiver for these banks.

The FDIC insures deposits in 7,760 banks and savings associations in the country as well as promotes the safety and soundness of these institutions. When a bank collapses, the FDIC reimburses deposits of up to $250,000 per account.

Though the FDIC has managed to shore up its deposit insurance fund during the last few quarters, the outbreak of bank failures has tested its limits. As of September 30, 2010, the fund remained in the red with a deficit of $8 billion despite adding $7.2 billion during the quarter.

The failure of The First State Bank is expected to be dearer by about $20.1 million for the FDIC, while Evergreen State Bank will cost about $22.8 million. The other two banks, FirsTier Bank and First Community Bank will cost FDIC about $242.6 million and $260.0 million, respectively.

Oklahoma City, Oklahoma-based Bank 7 has agreed to assume assets and deposits of The First State Bank.

McFarland, Wisconsin-based McFarland State Bank has agreed to assume assets and deposits of Evergreen State Bank.

The FDIC created the Deposit Insurance National Bank of Louisville (DINB) to provide FirsTier Bank's depositors access to their insured deposits. Notably, DINB will remain open until February 28, 2011.

Minneapolis, Minnesota-based U.S. Bank, National Association, the lead bank of U.S. Bancorp (NYSE: USB), has agreed to assume assets and deposits of First Community Bank.

In the third quarter of 2010, the number of banks on FDIC's list of problem institutions grew to 860 from 829 in the previous quarter and 552 in the year-ago quarter. This is the highest since the savings and loan crisis in the early 1990s.

Increasing loan losses on commercial real estate are expected to result in hundreds of bank failures in the next few years. Going by the current rate of bank failures, the FDIC is likely to feel a $52 billion pinch over the next three years.

The failure of Washington Mutual in 2008 was the largest in the U.S. banking history. It was acquired by JPMorgan Chase & Co. (NYSE: JPM).

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