ExxonMobil Corporation (XOM - Analyst Report) posted third-quarter 2014 earnings of $1.89 per share, beating the Zacks Consensus Estimate of $1.75. The bottom line also increased from $1.79 in the year-ago quarter. The upside came from higher margins and improved operations in the Downstream and Chemical businesses.

Exxon Mobil Corporation - Earnings Surprise | FindTheBest

Total revenue in the quarter decreased from $112.4 billion in the year-ago quarter to $107.5 billion. The top line, however, beat the Zacks Consensus Estimate of $101.0 billion as well.

Operational Performance

Upstream: Quarterly earnings for the segment were $6.4 billion, down $297 million year over year. The decrease stemmed from lower realizations, partly compensated by a favorable volume mix.

Production averaged 3.831 million barrels of oil-equivalent per day (MMBOE/d), down 4.7% year over year. Liquid production decreased 6.1% year over year to 2.065 million barrels per day owing to the expiry of an Abu Dhabi onshore concession. Natural gas production was 10,595 MCF/d (millions of cubic feet per day), down 319 MCF/d from 2013, primarily due to lower volume and field decline.

Downstream: The segment recorded profit of $1.0 billion in the third quarter, up $432 million year over year, mainly attributable to higher refining margins.

ExxonMobil's refinery throughput averaged 4.6 million barrels per day (MMBPD), down from the year-earlier level of 4.8 MMBPD.

Chemical: This unit contributed approximately $1.2 billion to the company's profits, up $175 million from the year-earlier quarter. The upside was mainly backed by higher margins along with the favorable effects of volume and mix.

Financials

During the quarter, ExxonMobil generated cash flow from operations and asset sales of $12.5 billion. The company returned $5.9 billion to shareholders through dividends and share repurchases. Capital spending decreased 7% year over year to $9.8 billion.

Our Take

We believe that ExxonMobil is the world's best-run integrated oil company based on its track record of high returns on capital employed. The company boasts diversified operations across the world with several new projects coming online through 2014.

ExxonMobil's strength lies in its balanced operations, strong financial flexibility, efficiency and cost control. The company's efforts to build an unconventional resource portfolio both in North America and overseas are aimed at increasing production through wider exposure to large energy resources with a long reserve life and low field declines. However, we are skeptical about the company's near-term performance due to its muddled refining fortunes.

ExxonMobil currently has a Zacks Rank #3 (Hold). Investors interested in the same sector could consider stocks like Tallgrass Energy Partners LP (TEP -Snapshot Report), Delek Logistics Partners LP (DKL - Snapshot Report) and Enbridge Energy Management LLC (EEQ - Snapshot Report). All of these have a Zacks Rank #1 (Strong Buy) and appear more rewarding for the short term.

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