How to Play XOM Stock After the Earnings Report

xom stockExxon Mobil Corp. (NYSE: XOM) released its Q1 report yesterday (Thursday). The oil giant saw a 46% earnings loss as low oil prices continue to eat into energy companies' profits.

XOM stock also took a beating last quarter. It tumbled 8.1% between Jan. 1 and March 31. Shares have fallen 13.9% since oil prices started crashing last June.

But the sector is poised to rebound this year as WTI and Brent prices move higher. Money Morning Global Energy Strategist Dr. Kent Moors expects oil to trade in the $80 range by the end of 2015.

Here's everything you need to know about Exxon's first-quarter report - and whether or not you should invest in XOM stock today...

How Exxon's Earnings Report Affected XOM Stock

Despite an earnings drop from the year-ago quarter, Exxon's Q1 numbers smashed expectations.

The company posted $4.9 billion in earnings. That marks a 46.2% drop from the $9.1 billion earned in Q1 2014. Exxon reported adjusted earnings per share (EPS) of $1.17 - a 44% decrease from $2.10 a year ago.

But both amounts still surpassed analyst projections. According to Bloomberg, Exxon's earnings beat Wall Street's $3.64 billion forecast by 34.6%. The EPS was 42.7% higher than analysts' projected $0.82.

"ExxonMobil's balanced portfolio delivered solid financial results in the quarter," said CEO Rex Tillerson in a press release. "Regardless of current market conditions, we remain focused on business fundamentals and competitive advantages that create long-term shareholder value."

The upstream sector was unsurprisingly weak. It made $2.9 billion, which is a 63.8% decrease from the year-ago quarter's $8 billion. Exploration and production (E&P) operations alone generated $52 million in losses.

On the other hand, Exxon's downstream saw huge gains, which has been a common theme this earnings season. Profits from the firm's global collection of refineries more than doubled to $1.67 billion. Downstream facilities outside the United States reported an almost sixfold profit increase.

"The international downstream clearly delivered the goods in what was almost perfect conditions of low oil prices and strong refining margins," noted Ed Westlake, analyst at Credit Suisse Group AG (NYSE ADR: CS), in a note yesterday.

XOM stock immediately reacted to the numbers. Shares were up 0.8% by the time markets opened yesterday morning - but they fell 0.5% by market close.

With all these mixed results, the big question is...

Should I Buy XOM Stock?

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According to Money Morning Technical Trading Specialist D.R. Barton, XOM stock is one of the best oil plays on the market. It offers a healthy combination of valuation and dividend yield.

Exxon sits on a market capitalization of $366.04 billion. That's the highest of all six Big Oil companies and more than BP Plc. (NYSE ADR: BP) and Chevron Corp. (NYSE: CVX) combined.

Not to mention Exxon is one of the few energy firms on the "dividend aristocrat" list. The dividend aristocrats are S&P 500 stocks that have increased their payouts for at least 25 consecutive years.

That makes the company's dividend policy one of the most competitive in the sector. Last quarter, the XOM dividend rose 9.5% to $0.69 a share compared with Q1 2014. It recently announced a dividend increase to $.73 per share, bringing the yield to 3.34%.

Exxon reported it distributed $3.9 billion worth of dividends to shareholders. About $1 billion of that was in the form of share purchases to reduce the number of outstanding shares.

The Bottom Line: It's tough to figure out if Exxon's earnings were good or bad. The company beat analyst expectations by a huge margin but endured losses from the year-ago quarter. Despite the mixed numbers, XOM stock's dividend and market heft alone make it a "Buy" - especially as oil prices stabilize throughout the year.

More on Oil Prices: Investors fear that the tentative agreement with Iran will flood the market with oil and further lower the price. That's what pundits will tell you if they have 30 seconds of airtime to say something. Here's why they're wrong and what to really expect...

What do you think about XOM stock? Talk to us on Twitter at @AlexMcGuire92 and @moneymorning.

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