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Exxon Could Pass Apple in Market Value

Douglas A. McIntyre

If poor earnings reset Apple Inc.'s (AAPL) shares back to where they traded in September, the market value of Exxon Mobil Corp. (XOM) may well top that of the consumer electronics company. As a matter of fact, a 10% sell-off in Apple's stock due to the unexpectedly low sales of iPhones and a poor forecast would make the race close.

Apple's market capitalization stood at $550 billion before what is expected to be a plunge. A drop of 10% would push shares to $495 billion, just below the critical $500 billion mark. Apple's value would fall from $495 billion to $445 billion under those circumstances. And Apple's shares lost substantially more than that in both dollars and on a percentage basis when the company began to disappoint investors with lackluster products just a year ago. The stock quickly sold off from more than $700 a share in late 2012 to $440 in January 2013.

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Exxon's stock price has been much more stable over the past year. It has risen steadily from August's level of $85 to $95 more recently. The stock topped $100 late last year. At that point in December, Exxon's market cap was $441 billion. It would only have to recapture that level to match the point to which Apple will fall -- if Apple's recent share price history is any indication.

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Exxon has an important advantage over Apple. Its earnings are expected to rise in 2014, a forecast that could be cemented when it releases year-end earnings. At this point, Wall Street expects full-year 2014 earnings to reach $7.84 per share, up from $7.40 this year.

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Exxon has one other advantage -- the seal of approval from Warren Buffet. As MarketWatch reported recently:

Shares of Exxon Mobil Corp. have outpaced rivals in recent months, basking in a "Warren Buffett effect" and also thanks to soaring natural-gas prices.

For anyone considering it, however, Exxon XOM -0.07% is still more expensive than many of its peers, and the market is growing nervous about falling oil-futures prices. Most analysts still have a "hold" rating on the stock.

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Exxon has gained 13% in the past three months, compared with gains of 0.8% for the NYSE Arca Oil index, which encompasses Chevron Corp., ConocoPhillips, BP PLC and other energy heavy-hitters.

Buffett's Berkshire Hathaway Inc. took a major stake in Exxon in November, buying a little over 40 million shares worth nearly $4 billion.

Exxon is also the No. 1 natural-gas producer in the nation thanks to the XTO Energy, announced in 2009 and completed a year later. Natural-gas prices rallied Tuesday as a winter storm hit the Northeast and the Midwest, and some analysts calling for a "Polar Vortex II."

Based on most current evidence about the two companies, Exxon's move into first place is likely only a matter of time.

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