ExxonMobil Before Q3 Earnings: Stock Strategies Moving Forward

Exxon Mobil Corporation (XOM) is gearing up to unveil its third-quarter earnings for 2024 on Friday morning. Investors are keenly anticipating the results, especially given the shifts in commodity prices and the company's recent acquisition.

The consensus estimate from analysts suggests that ExxonMobil’s third-quarter earnings will come in at approximately $1.95 per share. This would represent a fall of about 14.1% compared to the same period last year. Over the past month, revisions in estimates have shown a slight bias towards the downside, with three analysts adjusting their predictions downward while two have made upward adjustments. Revenue expectations for the quarter stand at $94.2 billion, marking a modest 3.8% increase year-over-year.

Performance Overview and Earnings Expectations

ExxonMobil's recent performance has been mixed; in the last four quarters, the company exceeded earnings expectations twice but fell short on two occasions. On average, the company has seen a negative surprise of 1.84% during this period.

However, current indicators suggest that a strong earnings surprise is unlikely this time. The company’s Earnings Surprise Prediction (ESP) stands at -2.52%, alongside a Zacks Rank of #3 (Hold), signaling that the likelihood of an earnings beat may not be in ExxonMobil's favor this quarter.

Critical Factors Impacting Q3 Outcomes

According to a recent Form 8-K filing by ExxonMobil, weaker oil prices could result in a drop in upstream earnings by as much as $1 billion in comparison to previous quarters. This decline is reflected in crude oil prices, which saw an average of $81.80, $76.68, and $70.24 per barrel in July, August, and September respectively, contrasting with the previous year’s stronger pricing.

In addition to fluctuating oil prices, the refining margins within the energy sector are anticipated to negatively affect earnings, potentially reducing profits in the Energy Products segment by an additional $0.6 billion to $1 billion versus the prior quarter.

Stock Performance and Valuation Insights

Over the last year, ExxonMobil's stock has risen impressively by 14.3%, outperforming the sector average of 6.8%. In comparison, other major integrated energy players have had varying results—BP plc (BP) has seen a decline of 15.5%, whereas Chevron Corporation (CVX) experienced a growth of 7.3%.

Despite the positive stock performance, there are concerns regarding valuation. Currently, ExxonMobil's EV/EBITDA ratio sits at 6.30, which is notably higher than the industry average of 3.86.

Investment Opportunities and Considerations

The acquisition of Pioneer Natural Resources significantly enhances ExxonMobil's production capabilities in the Permian Basin, a region noted for its low production costs and profitability. The company is also harnessing its offshore assets in Guyana, which are recognized for economic operational frameworks.

ExxonMobil is managing a robust pipeline of projects and maintains a strong balance sheet. This financial strength allows the company some flexibility amidst challenging market dynamics. Moreover, investments in alternative energy initiatives, including carbon capture technologies and lithium battery solutions, present potential long-term growth avenues. However, these projects come with high capital requirements and uncertain short-term returns, along with the inherent risks associated with volatile oil and gas prices.

Conclusion

Given the current market conditions and ExxonMobil's strategic moves, holding onto the stock may be a wise move for investors. This could lead to potential benefits as ExxonMobil continues to leverage its resources for long-term growth.

ExxonMobil, Earnings, Investment