YOU WANTED TO KNOW WHY GASOLINE PRICES
ARE SO HIGH? IT'S BECAUSE, AS A
Exxon May Pass GE as World's
On Thursday the whiff of $40 oil helped Exxon shares reach a
two-year high of $44.24, giving the company a market value of
GE, which makes everything from light bulbs, mortgages and
sitcoms to jet engines and power-plant turbines, still has a
comfortable lead at $311 billion, about 8 percent higher. But
analysts say its place at the top is in jeopardy.
"You don't need that much of a jump (by Exxon) for this to
happen," Standard & Poor's equities analyst Howard Silverblatt
said. "Oil prices are going up, while GE has a lot of financing
businesses, where rising rates can interfere with earnings."
GE disputes the idea that higher rates will have a major
impact on its results.
S&P, the credit rating agency that manages the benchmark S&P
500 Index, forecasts Exxon's market value will reach $328
billion this year -- though it will be a photo finish with
software giant Microsoft Corp. (Nasdaq:MSFT
GE, meanwhile, could slip to $306 billion, according to S&P
forecasts, as its earnings power dims this year. If the lead
does change hands, it would cap off a remarkable period for the
GE was the most valuable U.S. company on Dec. 31 for the
better part of 10 years, with the exception of 2002, 1999 and
1998, when New Economy fervor propelled Microsoft to the top
GE was also among the five largest U.S. companies throughout
the 1980s and early '90s.
To be sure, these figures are only snapshots in time.
Predecessor company Exxon Corp. ranked atop the S&P 500 at the
end of 1990 through 1992, when military action in Iraq (news
web sites) last sent oil prices above $40 a barrel.
"While market cap is certainly one indicator of success, we
are prouder of the disciplined management that we bring," said
Exxon Mobil spokesman Tom Cirigliano.
It's no secret that Exxon's fortunes rise and fall with the
price of energy commodities. And with oil and gas profits
gushing, investors have sent Exxon shares up 25 percent in the
past 12 months, outperforming the S&P 500 by three points.
But those profit swings are the main reason oil stocks are
less valuable. Exxon shares currently have a price-to-earnings
multiple of 17, a steep discount to the S&P 500's multiple of
about 27 times earnings.
Shares of GE, a diversified industrial and financial
conglomerate, fetches 20 times earnings.
Still, a growing number of investors have concluded energy
prices won't fall back to historic averages any time soon.
On Friday oil broke through the $40 a barrel mark, the
highest level since Iraq invaded Kuwait in October 1990, on
worries about security concerns in the Middle East and thin U.S.
gasoline supplies. Oil closed at $39.93 a barrel, up 56
High energy prices are bad news for the global economy, but
they've generated windfall profits for Exxon. In the first
quarter, the Irving, Texas, company reported record earnings of
$5 billion, putting it on track to surpass last year's record
profit of $21.5 billion.
"Unless oil and gas collapse I think Exxon Mobil could earn
$22 billion to $23 billion this year," said analyst Fadel Gheit
of Oppenheimer & Co.
And while energy shares have soared, GE shares have slipped
2.3 percent this year and more than 10 percent since reaching a
two-year high in late January. GE's net income in the most
recent quarter was $3.24 billion.
GE spokesman David Frail said the company doesn't comment on
market value. "We feel very good about where we are and our
earnings prospects," he said, calling GE's longterm financial