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Pre Q2 Earnings: How Should You Play ExxonMobil (XOM)?
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Exxon Mobil Corporation (XOM - Free Report) is set to report second-quarter 2024 results on Aug 2, 2024, before the opening bell.
The Zacks Consensus Estimate for second-quarter earnings is pegged at $2.04 per share, implying growth of 5.2% from the year-ago reported number. The estimate was revised downward by seven analysts in the past 30 days against no upward movement. The Zacks Consensus Estimate for second-quarter revenues is currently pegged at $90.4 billion, suggesting a 9% uptick from the year-ago actuals.
Image Source: Zacks Investment Research
XOM beat the consensus estimate for earnings in one of the trailing four quarters and missed the same thrice, with the average negative surprise being 0.13%. This is depicted in the graph below:
Our proven model doesn’t predict an earnings beat for XOM this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. That is not the case here.
The leading integrated energy player has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate is the same as the Zacks Consensus Estimate. XOM currently carries a Zacks Rank #4 (Sell).
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors Shaping Q2 Results
ExxonMobildisclosed in a Form 8-K that soft natural gas prices due to lower demand and excess inventories will sequentially hurt its earnings for the second quarter of 2024.
Owing to changes in prices of the commodity, the leading integrated energy player expects its second-quarter earnings to decline sequentially by $300 million to $700 million. However, XOM projects that a favorable crude pricing scenario in the June quarter will offset this negative impact completely.
ExxonMobil added that unfavorable changes in industry margins will affect its earnings from refining activities by $1.1 billion to $1.5 billion. These estimates exclude the impact of the acquisition of Pioneer Natural Resources, which was closed on May 3 and strengthened the company’s footprint in the Permian Basin, the most prolific basin in the United States.
The additional impact from the Pioneer Natural acquisition is expected to result in the production of 500-550 thousand barrels of oil equivalent per day. This acquisition is likely to have affected XOM’s earnings from May 3 to Jun 30. Notably, our model predicts an increase in ExxonMobil’s total oil-equivalent production volumes by 16.6% year over year.
Price Performance & Valuation
XOM's stock has soared 12.1% over the past year compared with the industry’s rise of 7.5%. BP plc (BP - Free Report) and Chevron Corporation (CVX - Free Report) , two other big integrated energy companies, have declined 1.7% and 0.4%, respectively, over the same time frame.
One-Year Price Chart
Image Source: Zacks Investment Research
With the price increase, XOM is appearing relatively overvalued. The company's current trailing 12-month enterprise value/earnings before interest, tax, depreciation and amortization (EV/EBITDA) ratio is 6.43, which is trading at a premium compared to the industry average of 3.99.
Image Source: Zacks Investment Research
Investment Thesis
The merger with Pioneer Natural Resources, finalized on May 3, has increased ExxonMobil's debt load. This elevated debt may adversely impact the company's financial stability and flexibility, possibly deterring risk-averse investors. While the merger enhances ExxonMobil's production capacity, it does so in an already oversupplied market. This increased supply could exacerbate existing issues of excess inventory, potentially leading to future oil price declines as production ramps up. Such market dynamics may affect ExxonMobil's profitability and stock price stability, posing challenges to the company's long-term financial health.
ExxonMobil expects challenges such as low gas prices and unfavorable industry margins to have adversely impacted second-quarter earnings, raising concerns among investors. Additionally, over the past two years, XOM has offered lower dividend yields compared to the industry’s composite stocks.
Last Word
Given the bearish business environment surrounding ExxonMobil, it may be prudent for investors to sell the stock.
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Pre Q2 Earnings: How Should You Play ExxonMobil (XOM)?
Exxon Mobil Corporation (XOM - Free Report) is set to report second-quarter 2024 results on Aug 2, 2024, before the opening bell.
The Zacks Consensus Estimate for second-quarter earnings is pegged at $2.04 per share, implying growth of 5.2% from the year-ago reported number. The estimate was revised downward by seven analysts in the past 30 days against no upward movement. The Zacks Consensus Estimate for second-quarter revenues is currently pegged at $90.4 billion, suggesting a 9% uptick from the year-ago actuals.
XOM beat the consensus estimate for earnings in one of the trailing four quarters and missed the same thrice, with the average negative surprise being 0.13%. This is depicted in the graph below:
Exxon Mobil Corporation Price and EPS Surprise
Exxon Mobil Corporation price-eps-surprise | Exxon Mobil Corporation Quote
Q2 Earnings Whispers
Our proven model doesn’t predict an earnings beat for XOM this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. That is not the case here.
The leading integrated energy player has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate is the same as the Zacks Consensus Estimate. XOM currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank stocks here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors Shaping Q2 Results
ExxonMobildisclosed in a Form 8-K that soft natural gas prices due to lower demand and excess inventories will sequentially hurt its earnings for the second quarter of 2024.
Owing to changes in prices of the commodity, the leading integrated energy player expects its second-quarter earnings to decline sequentially by $300 million to $700 million. However, XOM projects that a favorable crude pricing scenario in the June quarter will offset this negative impact completely.
ExxonMobil added that unfavorable changes in industry margins will affect its earnings from refining activities by $1.1 billion to $1.5 billion. These estimates exclude the impact of the acquisition of Pioneer Natural Resources, which was closed on May 3 and strengthened the company’s footprint in the Permian Basin, the most prolific basin in the United States.
The additional impact from the Pioneer Natural acquisition is expected to result in the production of 500-550 thousand barrels of oil equivalent per day. This acquisition is likely to have affected XOM’s earnings from May 3 to Jun 30. Notably, our model predicts an increase in ExxonMobil’s total oil-equivalent production volumes by 16.6% year over year.
Price Performance & Valuation
XOM's stock has soared 12.1% over the past year compared with the industry’s rise of 7.5%. BP plc (BP - Free Report) and Chevron Corporation (CVX - Free Report) , two other big integrated energy companies, have declined 1.7% and 0.4%, respectively, over the same time frame.
One-Year Price Chart
With the price increase, XOM is appearing relatively overvalued. The company's current trailing 12-month enterprise value/earnings before interest, tax, depreciation and amortization (EV/EBITDA) ratio is 6.43, which is trading at a premium compared to the industry average of 3.99.
Image Source: Zacks Investment Research
Investment Thesis
The merger with Pioneer Natural Resources, finalized on May 3, has increased ExxonMobil's debt load. This elevated debt may adversely impact the company's financial stability and flexibility, possibly deterring risk-averse investors. While the merger enhances ExxonMobil's production capacity, it does so in an already oversupplied market. This increased supply could exacerbate existing issues of excess inventory, potentially leading to future oil price declines as production ramps up. Such market dynamics may affect ExxonMobil's profitability and stock price stability, posing challenges to the company's long-term financial health.
ExxonMobil expects challenges such as low gas prices and unfavorable industry margins to have adversely impacted second-quarter earnings, raising concerns among investors. Additionally, over the past two years, XOM has offered lower dividend yields compared to the industry’s composite stocks.
Last Word
Given the bearish business environment surrounding ExxonMobil, it may be prudent for investors to sell the stock.