Imperial Oil Ltd. (TSX:IMO)(NYSE:IMO), Canada’s largest petroleum refiner, released its second-quarter earnings results before the market opened on Friday, and its stock responded by falling about 3.1% in the day’s trading session. Let’s take a closer look at the results and the fundamentals of its stock to determine if we should consider using this weakness as a long-term buying opportunity.
Breaking down Imperial Oil’s Q2 performance
Here’s a quick breakdown of 10 of the most notable statistics from Imperial Oil’s three-month period ended on June 30, 2017, compared with the same period in 2016:
| Metric | Q2 2017 | Q2 2016 | Change |
| Revenues and other income | $7,033 million | $6,248 million | 12.6% |
| Net income (U.S. GAAP) | ($77 million) | ($181 million) | 57.5% |
| Net income per share (EPS) | ($0.09) | ($0.21) | 57.1% |
| Cash generated from operating activities | $492 million | $443 million | 11.1% |
| Capital and exploration expenditures | $143 million | $335 million | (57.3%) |
| Total production (barrels of oil-equivalents per day) | 331,000 | 329,000 | 0.6% |
| Refinery throughput (barrels per day) | 358,000 | 246,000 | 45.5% |
| Refinery capacity utilization | 85% | 58% | 2,700 basis points |
| Petroleum product sales (barrels per day) | 486,000 | 470,000 | 3.4% |
| Petrochemical sales (tonnes) | 201,000 | 232,000 | (13.4%) |
Should you buy Imperial Oil on the dip?
It was a good quarter overall for Imperial Oil when you consider that it increased its revenues, reduced its expenses, and grew its production compared with the year-ago period. The second quarter also capped off a solid first half of the year for the company, in which its revenues increased 23.7% year over year to $14.19 billion, and it reported net income of $256 million, or $0.30 per share, compared with a net loss of $282 million, of $0.33 per share, in the year-ago period.
With all of this being said, I think the decline in Imperial Oil’s stock represents an attractive buying opportunity for long-term investors for two primary reasons.
First, it’s undervalued. Imperial Oil’s stock now trades at just 19.4 times fiscal 2017’s estimated EPS of $1.86 and only 14.3 times fiscal 2018’s estimated EPS of $2.52, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 23.2.
Second, it’s a dividend-growth aristocrat. Imperial Oil pays a quarterly dividend of $0.16 per share, equal to $0.64 per share annually, which gives it a 1.8% yield. A 1.8% yield is far from high, but it’s very important to note that the company has raised its annual dividend payment for 22 consecutive years, and its 6.7% hike in April has it on pace for 2017 to mark the 23rd consecutive year with an increase.
With all of the information provided above in mind, I think Foolish investors seeking exposure to the oil and gas industry should consider using the post-earnings weakness in Imperial Oil to begin scaling in to long-term positions.
