Why Exxon Mobil Corporation's Stock Sank 15% in February

MarketsMotley Fool

What happened

Shares of ExxonMobil Corporation (NYSE: XOM) fell sharply last month, losing 15% of their value after the company reported disappointing fourth-quarter results.

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So what

ExxonMobil announced its fourth-quarter earnings in early February. Analysts were expecting the oil giant to post a strong quarter given the big rise in oil prices at the end of last year. Instead, the company reported an adjusted profit of only $0.88 per share, which was 2% below the prior-year quarter and much less than the $1.03 per share analysts expected. Driving the miss was a 3.2% decline in Exxon's production during the quarter, as well as weaker earnings from its international refining business.

That earnings shortfall caught investors by surprise and came at the worst possible time since the market was in the midst of a massive sell-off spurred by interest rate fears. As a result, ExxonMobil's stock had its worst day since 2011, falling more than 5% on the date the company reported results. That sell-off continued the next day as the market's tumble accelerated and analysts cut their ratings on the oil giant's stock due to its production troubles.

Now what

While Exxon's fourth-quarter results were surprisingly weak, the subsequent sell-off whipped away a jaw-dropping $60 billion from the oil giant's market value last month. That seems like an overreaction for a company that expects production and cash flow to rise in the coming years as it brings new projects online and the oil market improves. Patient investors could consider buying Exxon's now 4%-yielding stock and get paid well while they wait for those improvements to materialize.

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Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.