We are at the midpoint of the second-quarter 2024 earnings, with many energy firms having released results. Two major integrated energy companies, Exxon Mobil Corporation (XOM Quick QuoteXOM - Free Report) and Chevron Corporation (CVX Quick QuoteCVX - Free Report) , are scheduled to report their earnings on Aug 2. Investors are likely weighing which stock is better positioned ahead of the second-quarter earnings reports.

XOM’s Surpasses CVX in Price Performance

ExxonMobil has proven to be incredibly rewarding, gaining 20.7% year to date, surpassing the 12% rise of the composite stocks belonging to the Zacks Oil and Gas Integrated International industry. A solid pipeline of profitable upstream projects centered around the prolific Permian and Guyana assets is among the key factors that are leading to the outperformance.

Contrary to expectations, despite gaining 9.8% so far this year, Chevron is currently trailing behind both ExxonMobil and the industry, as depicted by the price chart.

Year-To-Date Price Chart

Image Source: Zacks Investment Research

Price Performance Not Depicting True Picture

Despite outperforming CVX in terms of price performance, XOM’s business outlook appears bleak. ExxonMobil disclosed in a Form 8-K that soft natural gas prices due to lower demand and excess inventories will sequentially hurt its second-quarter earnings.

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, the most prolific basin in the United States.

The additional impact from the Pioneer Natural Resources 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.

The Zacks Consensus Estimate for second-quarter earnings per share stands at $2.04, with revenues estimated at $90.4 billion. Our proven model doesn’t predict an earnings beat for ExxonMobil this time around because it does not have the right combination of a positive  Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to increase the chances of an earnings beat. XOM has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell). 

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Also, our proprietary model does not predict an earnings beat for Chevron this time around, as CVX has an Earnings ESP of 0.00% and a Zacks Rank #3. The Zacks Consensus Estimate for second-quarter earnings per share stands at $2.88, with revenues estimated at close to $50.8 billion.You can see the complete list of today’s Zacks #1 Rank stocks here.

Strategic Moves: Sell XOM and Await Optimal CVX Investment Timing

In addition to concerns about XOM's Form 8-K disclosure, another factor that could heighten investor worries is the integrated energy giant’s merger with Pioneer Natural Resources, which was finalized on May 3 and has increased its debt load. This elevated debt may adversely impact ExxonMobil’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 excess inventory issues, potentially leading to future oil price declines as production ramps up. Such market dynamics may affect XOM's profitability and stock price stability, posing challenges to the company's long-term financial health.

Chevron, on the other hand, paints a rosy picture for the future. CVX has successfully started extracting oil from the Mad Dog 2 project in the Gulf of Mexico. Along with this, the company installed a floating production unit for the Anchor field. Consequently, Chevron has achieved the significant event of producing the first oil this year.

CVX is making progress in its downstream business too. To produce lower carbon-intensity fuels and products, the company has been evolving its refining system. The company has shared its progress regarding the conversion of its diesel hydroheater at its El Segundo refinery toward processing either fully renewable or traditional feedstocks.

Amid all these positives, there is uncertainty surrounding its acquisition of Hess Corporation (HES Quick QuoteHES - Free Report) . Hess, with its robust presence in the promising Guyana's Stabroek Block, could greatly enhance Chevron's business. However, a crucial arbitration hearing regarding the acquisition is scheduled for May 2025. This hearing will be instrumental in determining the future of this significant acquisition.

Despite the uncertainty, the overall business outlook for Chevron — one of the largest producers of oil and gas in the prolific Permian Basin — looks promising. However, investors should wait for a better entry point. This is because shares are somewhat expensive on a relative basis, with the current 6.31X trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization above the 5.96X five-year median. Also, the company is trading at a premium to the Zacks Oil and Gas International Integrated industry average of 4.07X.

Image Source: Zacks Investment Research

Capping Off

Considering all the above factors, we can say that Chevron is on a better footing than ExxonMobil ahead of the second-quarter 2024 earnings announcements.