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Exxon (XOM) Up 0.8% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

It has been about a month since the last earnings report for Exxon Mobil (XOM). Shares have added about 0.8% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Exxon due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

ExxonMobil Q3 Earnings Beat Estimates, Revenues Miss

ExxonMobilreported better-than-expected earnings for third-quarter 2019, courtesy of ramped-up liquid volumes in the prolific Permian Basin. This was offset partially by soft fuel margins.

This largest publicly-traded integrated energy company’s earnings per share of 68 cents surpassed the Zacks Consensus Estimate of 64 cents. However, the bottom line declined substantially from the year-earlier $1.46.

Total revenues of $65,049 million missed the Zacks Consensus Estimate of $67,872 and deteriorated from the year-earlier $76,605 million.

It is to be noted that ExxonMobil has divested around one-third of its targeted $15 billion of non-strategic assets. The company added that it has strengthened its portfolio of upstream assets in the September quarter after another oil discovery in the Stabroek block, located off the coast of Guyana. Notably, this is the fourth discovery in Guyana in 2019.

Operational Performance

Upstream: Quarterly earnings of $2.2 billion declined from $4.2 billion a year ago, owing to lower price realizations of commodities.

Total production averaged 3.899 million barrels of oil-equivalent per day (MMBOE/d), higher than 3.786 MMBOE/d a year ago.

Liquid production increased year over year to 2.392 million barrels per day (MMB/D) from 2.286 MMB/D, courtesy of ramped-up activities in the prolific Permian Basin. Also, natural gas production was 9.045 BCF/d (billions of cubic feet per day), marginally up from 9.001 BCF/d a year ago.

Downstream: The segment recorded a profit of $1,230 million, representing a decline of $412 million from $1,642 million in the September quarter of 2018. The underperformance can be attributed to maintenance activities and contraction in the industry’s fuel margins.

ExxonMobil's refinery throughput averaged 4.1 million barrels per day (MMB/D), lower than the year-earlier level of 4.4 MMB/D.

Chemical: This unit contributed to the company’s $241-million profit, down from $713 million in the prior-year quarter, induced by soft margins and increased project expenses.

Financials

During the quarter under review, ExxonMobil generated cash flow of $9.5 billion from operations and asset divestments, down from $12.6 billion a year ago. Owing to significant investments in the prolific Permian Basin, the company’s capital and exploration spending rose 17% year over year to $7.7 billion.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month. The consensus estimate has shifted 11.16% due to these changes.

VGM Scores

At this time, Exxon has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Exxon has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.



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