Shares of oil giant Exxon Mobil (XOMFree Exxon Mobil Stock Report) fell moderately after the company's second-quarter 2017 earnings came in short of expectations. Exxon generated $0.78 a share in profits during the period. While that was up from $0.41 a year earlier, it was less than our $0.95-a-share estimate and the Wall Street consensus, which had been falling in recent weeks on a pullback in oil prices. Given profit shortfall, we are reducing our full-year 2017 share-net estimate to $3.75 from $4.05.

The disappointing short-term results aside, the company's performance represented a nice turnaround from the poor results of the prior year, when oil prices were just coming out of a long slump. In addition, two of Exxon's three business lines, its oil and gas pumping division and its refining and marketing operations, enjoyed very favorable year-over-year profit comparisons.

In the oil and natural gas production unit, improved returns were driven by higher underlying commodity prices, as volume eased slightly (1%) in the past 12 months. Notably, there was a stark contrast between domestic and international drilling results, with the latter delivering all of the unit's profits. Exxon Mobil's U.S. pumping division turned in a slight, albeit narrower, loss, indicating the company has more work to do to boost efficiency stateside. Given this industry leader's track record, we figure it will accomplish that goal before too long. The focus on cost reduction is especially true nowadays, in view of less spending on growth initiatives. Capital expenditures for oil and gas ventures fell 25% in the first half of 2017. That is in line with the industry trend, given the broad feeling that oil supplies are plentiful these days.

Elsewhere, the refining business delivered much stronger results as margins and volumes improved but, similar to the pumping unit, the gains were driven by overseas performance. The only line not turning in better quarterly results was chemicals manufacturing. Higher maintenance activities, less volume, and lower margins decreased that division's bottom line.

Overall, the quarter was a bit of a letdown, as falling oil prices hurt results more than anticipated. Of promise is that crude oil quotations recently have firmed up as the pace of the decline in domestic inventories has picked up. That could provide some support for the stock. Even so, we don't look for a major pickup in business right away. Current conditions point to perhaps a slow grind higher for these top-quality shares. But investors can earn good income from the stock and very likely enjoy steady hikes in the payout in the meantime.

About The Company:Exxon Mobil Corp. is the largest publicly traded oil company in the world. It also owns 69.6% of Imperial Oil (Canada). Daily production in 2016 was as follows: crude oil, 2.4 million barrels (+1% vs. ’15); natural gas, 10.1 billion cubic feet (-4% vs. ’15). Reserves as of 12/31/16 were 20.0 billion barrels of oil equivalent, 53% oil, and 47% gas. The 10-year average reserve replacement rate is 82%. The daily refinery runs in 2016 were as follows: 4.3 million barrels (-4% vs. ’15); product sales, 5.5 million barrels (-5% vs. ’15); chemical sales, 24.9 million tons (+1% vs. ’15).

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.