ExxonMobil Tops Apple Again

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January 25, marked a change at the top of the market cap rankings. The oil and gas giant ExxonMobil (NYSE: XOM) ($218 billion) surpassed tech titan Apple (NASDAQ: AAPL) ($213 billion) as the result of the steep (and continuing) drop off in the stock price of the iconic maker of iPhones, iPads and iPods. Apple had held the top spot for exactly one year. The two companies traded positions at numbers one and two several times during 2011. 

Apple and ExxonMobil are also the two most profitable companies in America. 

Since announcing the first iPhone model in 2007 Apple's market cap increased by a factor of 6:1 before the recent sell off. It is still up by nearly 300%. Over the same time period the market cap of ExxonMobil actually dropped by about 10%.

Apple announced their quarterly results earlier in the week. While revenue was up, analysts expectations for more growth were not realized. And earnings, although falling slightly on a year-over-year basis, beat the Street. The number of iPhones sold was significantly higher than during the same period last year. Sales of iPads doubled. However, probably the most disconcerting news for investors was the relatively low (even for Apple) guidance that the company projected going forward.

Is this the end of the Apple bull run? All of the recent information indicates that the company is in a transitional period away from very high (60% EPS growth is hard to achieve over a long period of time) to somewhat slower growth going forward. 

ExxonMobil is expected to announce earnings on Feb. 1. The consensus estimate is for EPS to have grown by about 2.5% and then accelerate to 8% in each of the next two years. The company has a lot going for it. It generates mountains of cash and has little debt. It pays a dividend of $2.28 (yielding about 2.5%) and has increased it every year for more than 25 consecutive years, making it a member of the Dividend Aristocrats. It is poised to take advantage of the oil and natural gas revolution taking place in North America.

The top two have a huge lead over the next group on the market cap list. In fact the value that Apple has lost in the last 4 months is bigger than any other company's total market cap today, except ExxonMobil. The amount, about $249 billion, is even bigger than the GDP of many countries.

At number three in the rankings at $248 billion is the Internet search pioneer Google (NASDAQ: GOOG). The company didn't even show up on any market cap rankings until its IPO in August 2004. Its value was actually about double that of Apple at the time. Apple first surpassed Google in 2009, just before the iPad debuted. 

Google announced their latest results in the same week that Apple disappointed. It seems to have reversed a trend and is on the road to recovery from a lull last year. EPS increased by only 5%, but investors were delighted. The stock got a 7% bump after the announcement. 

Just below Google on the list is Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) with a valuation of $243 billion. The holding company for such diverse businesses as railroads, utilities, manufacturing and insurance is led by the world's most successful investor and one of the richest people on earth, Warren Buffett.

The company is expected to grown earnings by about 8% during the upcoming fiscal year according to the consensus. However, that is a big drop over the previous year's gain of 23%. Berkshire recently announced plans to buy back some of its own stock from the estate of a large investor, a practice it usually does only under favorable conditions. Mr. Buffett is typically very careful in this area.

So can Apple overtake ExxonMobil (again) at the top of the rankings? It probably will take some sort of catalyst like a share buyback, a dividend increase or a revolutionary new product. However, I'm betting that these two behemoths will continue to battle it out for the title for some time to come. 

 


Mathman6577 owns shares of Apple. The Motley Fool recommends Apple, Berkshire Hathaway, and Google. The Motley Fool owns shares of Apple, Berkshire Hathaway, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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