ExxonMobil (NYSE: XOM) stock slumped after reporting mixed Q1 earnings this morning. Analysts forecast the oil company would earn $2.06 per share for the quarter, and Exxon nailed that target. On the revenue front, Exxon's $83.1 billion in sales soared past Street expectations for $73.2 billion.

As of 12:15 p.m. ET, shares of the energy stock are down 2.8%. But if Exxon met on earnings and beat on sales, why is the stock down?

ExxonMobil Q1 earnings report

Well, not all of Exxon's news was great. Hurt by refining margins and weak natural gas prices, generally accepted accounting principles (GAAP) profits actually fell 28% year over year for the oil giant, and earnings per share were down 26% despite stock buybacks.

On the plus side, free cash flow for the quarter was a strong $10.1 billion -- 23% ahead of reported profits.

That's the number I'm focusing on today. As I've argued already, my worry about investing in oil stocks like Exxon is that historically, they report very strong earnings -- which are rarely backed up by as much free cash flow as they're claiming for their "profits."

Is Exxon stock a sell?

Exxon itself briefly avoided this curse during the pandemic, when it curtailed capital spending in response to reduced energy demand. But by 2023, Exxon was back to its old habits, reporting $36 billion in GAAP profits but less than $33.5 billion in real free cash flow.

This remains the case today. Exxon's trailing-12-month FCF of $32.1 billion doesn't quite back up its reported $32.8 billion in earnings. The Q1 report suggests that Exxon might be improving in this regard. Then again, management forecasts it will spend up to $25 billion on capital expenditures this year -- the most it's ever spent in the past 10 years. My hunch is that this is going to torpedo its FCF number.

Combined with falling earnings, this reinforces my belief that ExxonMobil stock -- even at a seemingly low P/E of less than 14 -- is still a sell.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Why ExxonMobil Stock Dropped on Earnings Friday was originally published by The Motley Fool