Why ExxonMobil missed 2Q13 earnings expectations (Part 1 of 6)
Why care about ExxonMobil?
ExxonMobil (XOM) is the largest integrated oil company in the world by many measures. The company is a bellwether for the industry, and it’s also the largest component of many major ETFs, including the Energy Select SPDR ETF (XLE), Vanguard Energy ETF (VDE), and iShares U.S. Energy ETF (IYE).
ExxonMobil (XOM) has three major segments: upstream, downstream, and chemicals. The majority of revenues and earnings comes from XOM’s upstream segment, under which the company produces oil and gas. XOM also is involved in the downstream segment, under which it’s involved in refining, logistics, and marketing operations. Lastly, XOM has a chemicals segment under which it manufactures and markets petrochemicals such as olefins, aromatics, polyethylene, and polypropylene plastics and various specialty products.
For 2Q13, XOM reported EPS of $1.55 compared to analysts’ consensus of $1.90 (a variance of 22%). The earnings miss was primarily due to high refinery maintenance in the company’s downstream segment and lower margins and higher operating costs in the company’s chemicals segment. XOM’s upstream segment performed generally in line. Plus, the company affirmed 2013 production and capex (capital expenditure) guidance. However, XOM noted that it would reduce the pace of its share repurchases to $3 billion in 3Q13, compared to $4 billion in 2Q13. Altogether, the market reacted negatively, with the stock closing at $92.73 per share on August 1, when earnings were reported, compared to $93.75 per share the day earlier.
For more details in 2Q13 results, please continue through this series.
Browse this series on Market Realist:
- Part 2 - Lower margins and refinery downtime hurt XOM downstream earnings
- Part 3 - Why ExxonMobil’s downstream segment is still a risk despite a blip
- Part 4 - Why ExxonMobil’s chemical segment was weaker in 2Q13
- Oil, Gas, & Consumable Fuels
- Basic Materials Industry