Exxon Mobile (XOM) is getting rid of it's retail by selling its stations. Hurt or Help their stock in '08 '09?

Question

Will XOM go up or down in your proffessional (hopefully) opinion?

Answer 1

This should be a substantial savings for the company and should the firm's bottom line.  Oil companies do not make much money selling gasoline at the retail leverl, (the government makes 4x as much as the oil companies).

The profit margin is not that great for the oil company, in fact in most cases it is approaching the point of deminishing return.  

PROBLEM, the domocratic party wants to tax the oil companies on such windfall profits, so the oil company will win by not being involved and the government will loose since there will be less windfall taxable items.

Bottom line, the profit should increase, which usually means the price of the stock should increase, BUT beware of what the democrats may want to do with "the big bad oil companies"

Answer 2

In the long run it will have a marginally small positive effect.

Running gas stations in a low margin business.

Assuming ExxonMobile re-invests that capital in a higher margin operation (which will not be difficult), a small positive increase in operating profit will accrue over time.

That is as close as I can get to the professional analysts opinion without being in violation of copyright.

:-)

Answer 3

In the USA, there are about 12,000 stations selling Exxon and Mobil gasoline.  Only 2,200 of them are owned by ExxonMobil.  It is only the 2,200 directly owned stations that the company is selling.  Chances are, most of those, when sold (to independent owners) will continue to sell Exxon and Mobil products so the company will still have a large business selling wholesale to all the "branded" retail stations.   So it should help, but not by a great amount.

Answer 4

they are cost cutting. what essentially will happen is that short term, there stock will dip as people run from the fact that without a retail operation, the exxon brand will be hurt by the potential loss or revenue. however, the cost of operating company owned Exxon stores represents a large chunk of their retail business with Mobil stations actually bringing in higher revenue.  Long term, into 2009 and 10, exxon will see increased profitability by this move.  As for the status of their stock, it SHOULD continue to rise, however there are so many other factors that will influence their stock price, it is difficult to say whether this will have any affect at all.

Answer 5

It won't make any difference.  They announced it.  This isn't a panic sale.  They aren't going to do it at once.  It will take several years.

The reason they are getting rid of it is that it is such a tiny part of their business that it is more of a drain on management's time than it's worth.

XOM is a huge explorer, producer, transporter and refiner.  What they make off of retail is like a rounding error on their refining business.

Answer 6

It will help XOM in the long run, but the oil prices will have a greater impact on stock prices.  In my completely unqualified and unprofessional opinion, I think the stock will drop a little in the short term, as well as the price of oil, but long term it's moving higher.

Answer 7

It will go up because oil will remain in demand over time, and the retail end is small for them. The chief benefit is to stop being dragged into the retail negativity in the gas industry.

Answer 8

They are simply divesting themselves of a division that is not making money as much as other areas.

I believe this will make their stock stronger in the long run, and they can do what they do best - refining.

If they stay in the retail business, they have to fight against companies like Wal Mart and supermarkets.  Remember - gas may be high, but most of the money goes to the Saudis and Venezuelans.  

It is now popular to bash the oil companies, but they are NOT the beneficiary of the high prices.  

Those of you with the huge SUVs, remember that you are giving most of your money to folks who hate us, the next time you fill up.  Don't blame Exxon and others.