Exxon Equity Analysis

Exxon Equity Analysis

1. INTRODUCTION

Exxon Mobil is world’s largest publicly traded integrated oil company serving companies in more than 200 countries worldwide. Standard and Poor’s stock report for Exxon Mobil indicates that Exxon’s global functional organization and substantial diversification helps mitigate its exposure to business risk and margin volatility.

As of December 31, 2007 Rex W. Tillerson has been serving as CEO of corporation since two years along with Senior Vice Presidents M. W. Albers, M. J. Dolan and D. D. Humphreys. They manage 51% institutional ownership of the company.

In terms of Equity Financing strategies, Exxon is implementing a continuous stock repurchase program rather than equity financing. In the first half of 2007, Exxon’s gross share purchases were worth $16 billion, reducing the shares outstanding by 3.2 percent. In 2006, Exxon Mobil paid out 1.77 percent of its stock price in dividends, about equal to the dividend yield for the entire S&P 500. Factoring in the $29.6 billion Exxon Mobil spent on buybacks that year, its yield jumps to 8.64 percent. Public companies share the wealth with investors mainly through dividends and stock buybacks, and both actions have historically benefited investor returns. Since both types of yield signify added value to shareholders, investors should be able to improve their odds in the market by harnessing the power of both statistics. Buybacks benefit shareholders by reducing the amount of stock, giving each remaining share a bigger slice of a company's earnings. Although U.S. policymakers claim that the company does not invest enough in new pumping capacity and spends too much on share buybacks, CEO Rex Tillerson reports that company disagrees with claims.

As company re-purchases on stocks essentially tells the market that they think that the company’s stock is undervalued. It is expected that this will have a psychological effect on the market. Also, the stock buybacks raise the demand for the stock on the open market.