ExxonMobil Before Q3 Earnings: A Strategic Outlook

Exxon Mobil Corporation (XOM) is preparing to announce its third-quarter 2024 results on Friday, just before the stock market opens.

The Zacks Consensus Estimate currently forecasts earnings of $1.95 per share for this quarter, indicating a decline of 14.1% compared to the same time last year. Over the past 30 days, three analysts have lowered their estimates, while only two have increased them. In terms of revenue, the current estimate stands at $94.2 billion, suggesting an increase of 3.8% from the previous year's performance.

Q3 Earnings Expectations for ExxonMobil

ExxonMobil has had a mixed earnings performance lately, exceeding consensus estimates in two of the last four quarters but missing them twice. The average negative surprise for the company in this period has been about 1.84%.

Unfortunately, our analysis suggests that XOM is unlikely to beat earnings expectations this time. The company currently holds an Earnings ESP of -2.52% and a Zacks Rank of #3, which indicates a Hold rating. A combination of a positive Earnings ESP and a higher Zacks Rank typically signals a higher likelihood of an earnings beat, which is not the case for XOM right now.

Factors Impacting ExxonMobil

According to a recent Form 8-K filing, ExxonMobil has indicated that declining oil prices may lead to a reduction in its earnings from upstream operations for the third quarter, estimated between $0.6 billion and $1 billion less than the previous quarter. This outlook aligns with the trend of stronger crude oil prices in the comparable quarter of 2023. Based on data from the U.S. Energy Information Administration (EIA), average WTI spot prices for July, August, and September 2024 were $81.80, $76.68, and $70.24 per barrel, respectively. In contrast, prices for the same months last year were significantly higher, standing at $76.07, $81.39, and $89.43 per barrel.

In addition, ExxonMobil expects lower industry refining margins to negatively impact earnings from its Energy Products division, predicting a decrease of $0.6 billion to $1 billion compared to the previous quarter.

ExxonMobil Stock Price Performance and Valuation

Over the past year, XOM's stock price has increased by 14.3%, outperforming the industry average, which rose by 6.8%. In contrast, another major energy company, BP plc, saw a decline of 15.5% during the same period, while Chevron Corporation recorded a gain of 7.3%.

Despite its price increase, ExxonMobil's valuation appears to be relatively high. The company's trailing 12-month enterprise value to EBITDA (EV/EBITDA) ratio stands at 6.30, which is significantly above the industry average of 3.86.

Investment Outlook for ExxonMobil

The recent acquisition of Pioneer Natural Resources has substantially enhanced ExxonMobil's production capabilities in the Permian Basin, recognized as one of the most lucrative regions in the United States due to its notably low production costs. Furthermore, the company has a robust lineup of projects in offshore Guyana, which also boasts cost-effective operations.

ExxonMobil is generally regarded for its efficient use of invested capital and possesses a strong financial foundation, positioning the company to endure challenging market conditions. Additionally, its investments in renewable energy options, such as carbon capture and lithium battery technologies, hold potential for future growth. However, these initiatives necessitate significant financial investment and may yield uncertain returns in the near term. Notably, the company's operations are highly sensitive to fluctuations in oil and natural gas prices.

Conclusion

Given the current situation, it may be wise for investors to maintain their positions in XOM stock and consider the long-term growth opportunities that ExxonMobil offers.

Earnings, ExxonMobil, Investing