Record Profit, yet Falling Stock

Mega oil giant, Exxon Mobil Corp., posted the largest US quarterly profit ever for a US corporation; it even broke its own previous record, reaching $14.83 billion in the third quarter. However, even though Exxon Mobil owns the record for being in the top 10 of profitable quarters for a US company, its stock price fell 3-percent by $2.28, settling at $72.37 during midday trading.

Why is it that the stock price fell upon news of such gargantuan profit?

The simple answer is that Exxon Mobil’s profit was riding on the back of one of the most profitable quarters in the oil industry, when oil topped out at an all time high of $147.27. The fundamentals of an oil company, how much of a company’s revenue is dependent on oil and gas production, and how many booked reserves a company can call upon, has dipped for Exxon Mobil by 8-percent from a year ago. Thus, while profits are high, the fundamentals are weakening, and the company’s success looks to be increasingly tenuous. Exxon Mobil’s future does not look as bright as it profit report would indicate, as the rapidly falling oil prices and decreasing opportunities for investment in much of the oil producing world (due to both “resource nationalism” and falling production in most existing fields) will eventually catch up with it.

Link: http://biz.yahoo.com/ap/081030/earns_exxon_mobil.html?printer=1

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