Exxon versus Chevron

Compare and contrast the limitations and usefulness of the single-step income statement and the multi-step income statement.
The single-step income statement shows a company’s net profit or net loss in a single mathematical equation. This statement does not separate income and expenses. This is useful when showing financial information to individuals who only need or want to see the end result. The single-step income statement is short and to the point. It is also less time consuming to prepare and more easily understood. The major drawback of the single-step income statement is the lack of information especially when creditors or investors are assessing a company’s financial statues. The multi-step income statement is a more detailed statement and includes details of a company’s different sources of income and expenses. This statement provides a broader assessment of a company’s financial statues to creditors and investors. It is, however, more time consuming to prepare the multi-step statement or fix a mistake on it.

Analyze the gross profit, operating profits, and net income of both Exxon and Chevron for 2012 and 2013. Of the two companies, speculate on the main reasons why one company may have been more profitable than the other company. Exxon

Exxon Mobil Corp., Net Profit Margin

Dec 31, 2013
Dec 31, 2012
Dec 31, 2011
Selected Financial Data (USD $ in millions)

Net income attributable to ExxonMobil
32,580
44,880
41,060
Sales and other operating revenue
420,836
453,123
467,029
Ratio

Net profit margin
7.74%
9.90%
8.79%
Benchmarks

Net Profit Margin, Competitors

BP PLC
6.19%
3.08%
6.84%
Chevron Corp.
9.73%
11.35%
11.01%
ConocoPhillips
16.83%
14.54%
5.08%
Royal Dutch Shell PLC
3.63%
5.69%
6.58%
Net Profit Margin, Sector

Integrated Oil & Gas
6.75%
7.43%
7.60%
Net Profit Margin, Industry

Oil & Gas
6.92%
7.39%
7.54%

2013 Calculations
Net profit margin = 100 × Net income attributable to ExxonMobil ÷ Sales and other operating revenue = 100 × 32,580 ÷ 420,836 = 7.74%

Exxon Mobil Corp., Operating Profit Margin(https://www.google.com/finance?fstype=ii&q=NYSE:X)

Dec 31, 2013
Dec 31, 2012
Dec 31, 2011
Selected Financial Data (USD $ in millions)

Operating income
40,301
49,881
54,104
Sales and other operating revenue
420,836
453,123
467,029
Ratio

Operating profit margin
9.58%
11.01%
11.58%
Benchmarks

Operating Profit Margin, Competitors

BP PLC
3.87%
1.87%
7.69%
Chevron Corp.
12.36%
15.18%
15.67%
ConocoPhillips
20.52%
20.94%
7.17%
Royal Dutch Shell PLC
5.73%
7.84%
8.91%
Operating Profit Margin, Sector

Integrated Oil & Gas
7.82%
8.88%
10.03%
Operating Profit Margin, Industry

Oil & Gas
8.37%
9.20%
10.08%

Operating profit margin = 100 × Operating income ÷ Sales and other operating revenue = 100 × 40,301 ÷ 420,836 = 9.58%

Exxon Mobil Corp., Gross Profit margin

Dec 31, 2013
Dec 31, 2012
Dec 31, 2011
Selected Financial Data (USD $ in millions)

Gross profit
105,566
117,044
126,724
Sales and other operating revenue
420,836
453,123
467,029

Gross profit margin
25.08%
25.83%
27.13%

2013 Calculations
Gross profit margin = 100 × Gross profit ÷ Sales and other operating revenue = 100 × 105,566 ÷ 420,836 = 25.08%

Chevron
Chevron Corp., Net Profit Margin

Dec 31, 2013
Dec 31, 2012
Dec 31, 2011
Selected Financial Data (USD $ in millions)

Net income attributable to Chevron Corporation
21,423
26,179
26,895
Sales and other operating revenues
220,156
230,590
244,371
Ratio

Net profit margin
9.73%
11.35%
11.01%
Benchmarks

Net Profit Margin, Competitors

BP PLC
6.19%
3.08%
6.84%
ConocoPhillips
16.83%
14.54%
5.08%
Exxon Mobil Corp.
7.74%
9.90%
8.79%
Royal Dutch Shell PLC
3.63%
5.69%
6.58%
Net Profit Margin, Sector

Integrated Oil & Gas
6.75%
7.43%
7.60%
Net Profit Margin, Industry

Oil & Gas
6.92%
7.39%
7.54%

2013 Calculations
Net profit margin = 100 × Net income attributable to Chevron Corporation ÷ Sales and other operating revenues = 100 × 21,423 ÷ 220,156 = 9.73% Chevron Corp., Operating Profit Margin

(http://www.chevron.com/annualreport/2013/

Dec 31, 2013
Dec 31, 2012
Dec 31, 2011
Selected Financial Data (USD $ in millions)

Operating income
27,213
35,013
38,299
Sales and other operating revenues
220,156
230,590
244,371
Ratio

Operating profit margin
12.36%
15.18%
15.67%
Benchmarks

Operating Profit Margin, Competitors

BP PLC
3.87%
1.87%
7.69%
ConocoPhillips
20.52%
20.94%
7.17%
Exxon Mobil Corp.
9.58%
11.01%
11.58%
Royal Dutch Shell PLC
5.73%
7.84%
8.91%
Operating Profit Margin, Sector

Integrated Oil & Gas
7.82%
8.88%
10.03%
Operating Profit Margin, Industry

Oil & Gas
8.37%
9.20%
10.08%

2013 Calculations
Operating profit margin = 100 × Operating income ÷ Sales and other operating revenues = 100 × 27,213 ÷ 220,156 = 12.36%

Chevron Corp., Gross Profit Margin

Dec 31, 2013
Dec 31, 2012
Dec 31, 2011
Selected Financial Data (USD $ in millions)

Gross profit
52,341
59,244
64,714
Sales and other operating revenues
220,156
230,590
244,371

Gross profit margin
23.77%
25.69%
26.48%

2013 Calculations
Gross profit margin = 100 × Gross profit ÷ Sales and other operating revenues = 100 × 52,341 ÷ 220,156 = 23.77%
Between the Exxon and Chevron companies, Chevron proves to be more profitable than Exxon since Chevron shrunk less in the previous year when the industry was faced with difficulties. Exxon is a far bigger company as compared to Chevron, but Chevron has proven to be more profitable than Exxon when the price per share growth is taken into consideration.

Compute each company’s price-earnings (P/E) ratio and price-to-sales ratio (PSR). Identify primary estimates or assumptions that could result in overstated earnings, and use the ratio data to compare the quality of each company’s earnings.

Exxon
Exxon Mobil Corp., Price to Earnings (P/E)

Dec 31, 2013
Dec 31, 2012
Dec 31, 2011
No. shares of common stock outstanding
4,321,238,544
4,480,449,635
4,713,220,567
Selected Financial Data (USD $)

Net income attributable to ExxonMobil (in millions)
32,580
44,880
41,060
Earnings per share (EPS)
7.54
10.02
8.71
Share price
95.79
89.53
87.34
Ratio

P/E ratio
12.71
8.94
10.03
Benchmarks

P/E Ratio, Competitors

BP PLC
7.08
11.21
5.69
Chevron Corp.
10.04
8.61
7.96
ConocoPhillips
8.91
8.49
7.60
Royal Dutch Shell PLC
13.66
7.89
7.19
P/E Ratio, Sector

Integrated Oil & Gas
10.69
8.82
7.95
P/E Ratio, Industry

Oil & Gas
11.90
10.00
9.19

2013 Calculations
EPS = Net income attributable to ExxonMobil ÷ No. shares of common stock outstanding = 32,580,000,000 ÷ 4,321,238,544 = 7.54 P/E ratio = Share price ÷ EPS = 95.79 ÷ 7.54 = 12.71

Exxon Mobil Corp., Price to Sales (P/S)

Dec 31, 2013
Dec 31, 2012
Dec 31, 2011
No. shares of common stock outstanding
4,321,238,544
4,480,449,635
4,713,220,567
Selected Financial Data (USD $)

Sales and other operating revenue (in millions)
420,836
453,123
467,029
Sales per share
97.39
101.13
99.09
Share price
95.79
89.53
87.34
Ratio

P/S ratio
0.98
0.89
0.88
Benchmarks

P/S Ratio, Competitors

BP PLC
0.44
0.35
0.39
Chevron Corp.
0.98
0.98
0.88
ConocoPhillips
1.50
1.23
0.39
Royal Dutch Shell PLC
0.50
0.45
0.47
P/S Ratio, Sector

Integrated Oil & Gas
0.72
0.65
0.60
P/S Ratio, Industry

Oil & Gas
0.82
0.74
0.69

2013 Calculations
Sales per share = Sales and other operating revenue ÷ No. shares of common stock outstanding = 420,836,000,000 ÷ 4,321,238,544 = 97.39 P/S ratio = Share price ÷ Sales per share = 95.79 ÷ 97.39 = 0.98

Chevron
Chevron Corp., Price to Sales (P/S)

Dec 31, 2013
Dec 31, 2012
Dec 31, 2011
No. shares of common stock outstanding
1,909,130,328
1,942,697,787
1,976,966,530
Selected Financial Data (USD $)

Sales and other operating revenues (in millions)
220,156
230,590
244,371
Sales per share
115.32
118.70
123.61
Share price
112.68
115.96
108.35
Ratio

P/S ratio
0.98
0.98
0.88
Benchmarks

P/S Ratio, Competitors

BP PLC
0.44
0.35
0.39
ConocoPhillips
1.50
1.23
0.39
Exxon Mobil Corp.
0.98
0.89
0.88
Royal Dutch Shell PLC
0.50
0.45
0.47
P/S Ratio, Sector

Integrated Oil & Gas
0.72
0.65
0.60
P/S Ratio, Industry

Oil & Gas
0.82
0.74
0.69

2013 Calculations
3 Sales per share = Sales and other operating revenues ÷ No. shares of common stock outstanding = 220,156,000,000 ÷ 1,909,130,328 = 115.32 4 P/S ratio = Share price ÷ Sales per share = 112.68 ÷ 115.32 = 0.98

Chevron Corp., Price to Earnings (P/E)

Dec 31, 2013
Dec 31, 2012
Dec 31, 2011
No. shares of common stock outstanding
1,909,130,328
1,942,697,787
1,976,966,530
Selected Financial Data (USD $)

Net income attributable to Chevron Corporation (in millions) 21,423
26,179
26,895
Earnings per share (EPS)
11.22
13.48
13.60
Share price
112.68
115.96
108.35
Ratio

P/E ratio
10.04
8.61
7.96
Benchmarks

P/E Ratio, Competitors

BP PLC
7.08
11.21
5.69
ConocoPhillips
8.91
8.49
7.60
Exxon Mobil Corp.
12.71
8.94
10.03
Royal Dutch Shell PLC
13.66
7.89
7.19
P/E Ratio, Sector

Integrated Oil & Gas
10.69
8.82
7.95
P/E Ratio, Industry

Oil & Gas
11.90
10.00
9.19

2013 Calculations

3 EPS = Net income attributable to Chevron Corporation ÷ No. shares of common stock outstanding = 21,423,000,000 ÷ 1,909,130,328 = 11.22 4 P/E ratio = Share price ÷ EPS = 112.68 ÷ 11.22 = 10.04

When reviewing the price-per-earning and the price-per-sales ratios of both of the companies, Chevron shows an increased likelihood to spend more money in the market than Exxon. Review notes to both Exxon’s and Chevron’s financial statements. Next, identify at least two notes pertaining to the income statement, and explain the main way in which the notes in question could influence your decision to invest in each of the companies. Provide a rationale to justify your decision.

While Exxon is considered to be bigger than Chevron, this is not actually the case when profitability and market expansion is of a concern. Chevron intends to spend more on expanding, while Exxon is trying to stabilize itself within the industry and its current market. It would then be more advisable to invest in Chevron rather than Exxon in order to receive the investment worth. Size may matter but in this case, profitability will be more useful in making an investment decision. (Chevron, 2014).