The skinny on Exxon Mobil's first quarter earnings report? It was a decent quarterly performance but it was below Wall Street's earnings estimate, hence bearish sentiment toward the stock should prevail, at least over the next few months.

Exxon Mobil (XOM) reported Q1 earnings per share of 92 cents versus the consensus estimate of 95 cents. It was Exxon's lowest quarterly profit in five years. Exxon earned $2.02 per share in Q1 2008.

Further, first quarter revenue plunged 45 percent to $64 billion versus the First Call consensus estimate of $54 billion. Also, Q1 oil and gas production rose slightly, to 4.2 million barrels of oil equivalent per day.

Exxon faced "difficult comps"

Although Exxon failed to meet the Q1 earnings per share estimate, investors should keep in mind that oil prices have plummeted from year ago, to about $50 today from about $100 in April 2008. Hence, Exxon's Q1 2008 results were 'inflated' by well-above-average oil prices, which also boosted gasoline prices, creating what stock analysts call "difficult comparisons" (or "difficult comps") for the current quarter.

Indeed, Exxon cited the global recession and lower commodity prices this year as factors that weighed on Q1 results.

That said, the difficult comps qualifier undoubtedly will not be enough to prevent investors from selling shares. Given current market and economic conditions, companies that miss quarterly earnings estimates typically see shares come under selling pressure. Indeed, shares of Exxon declined at the open. Exxon's shares have fallen about 14 percent this year.

Jason Gammel, analyst for Macquarie Securities USA in New York, is cautious on the oil sector, but has a favorable rating on Exxon's shares.

"The macro environment over the short term really doesn't look very good," Gammel told Bloomberg News Thursday, adding that he has an "Outperform" rating on Exxon Mobil's shares. "Inventories are very high for both crude oil and refined products. There's a lot spare capacity in the world right now."

Stock Analysis: I'll give Exxon Mobil a pass. Given inflated oil prices during the same quarter a year ago, Exxon faced difficult comps. That said, the outlook for both domestic and international oil demand remains bearish-to-sluggish, which will weigh on XOM's earnings until the economic recovery starts. Hence, if you already own the stock, it is a Hold. If you don't, it's a Don't Buy.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.


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