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Exxon (XOM) Up 19.2% Since Last Earnings Report: Can It Continue?

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Zacks Equity Research
·4 min read
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A month has gone by since the last earnings report for Exxon Mobil (XOM). Shares have added about 19.2% in that time frame, outperforming 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 Q4 Earnings Beat on Solid Chemical Margin

ExxonMobil’s fourth-quarter 2020 earnings per share of 3 cents — excluding identified items — beat the Zacks Consensus Estimate of a penny. However, the bottom line declined from the year-ago quarter’s earnings of 41 cents per share.

Total revenues of $46,540 million missed the Zacks Consensus Estimate of $48,591 and also deteriorated from the year-earlier figure of $67,173 million.

The better-than-expected earnings were owing to higher chemical margins, partially offset by lower oil-equivalent production volumes and commodity prices.

Operational Performance

Upstream

The segment reported quarterly loss of $18.5 billion against a profit of $6.1 billion in the prior year. This downside was due to weak oil-equivalent production volumes and commodity prices.

Operations in the United States recorded a loss of $16.8 billion against a profit of $68 million in the December quarter of 2019. Moreover, the company reported a loss of $1.7 billion from non-U.S. operations against a profit of $6.1 billion in the year-ago quarter.

Production: Total production averaged 3.689 million barrels of oil-equivalent per day (MMBoE/D), lower than 4.018 MMBoE/D a year ago, reflecting coronavirus-induced drop in fuel demand and curtailment of volumes as mandated by the government.

Liquid production decreased to 2.325 million barrels per day (MMBbls/D) from 2.436 MMBbls/D in the prior-year quarter. While production from Europe, Africa and Asia declined significantly, it increased in Canada and the United States. Moreover, natural gas production was 8.185 billion cubic feet per day (Bcf/d), down from 9.495 Bcf/d a year ago due to lower output from Asia, Europe and the United States.

Price Realization: In the United States, the company recorded crude price realization of $39.06 per barrel, lower than the year-ago quarter’s $55.61. The same metric for non-U.S. operations declined to $37.86 per barrel from the year-ago figure of $56.61. However, natural gas prices in the United States were recorded at $2.20 per thousand cubic feet (Kcf), higher than the year-ago quarter’s $2.16. Nonetheless, in the non-U.S. section, the metric declined to $4.85 per Kcf from $5.89 in fourth-quarter 2019.

Downstream

The segment recorded a loss of $1.2 billion against the year-ago profit of $898 million, primarily due to lower margins in both U.S. and non-U.S. operations since market demand was weak. This downside was offset partially by reduction in expenses.

Notably, ExxonMobil's refinery throughput averaged 3.8 MMBbls/D, lower than the year-earlier level of 4.1 MMBbls/D.

Chemical

This unit recorded $691-million profit, up from $355 million of loss in the year-ago quarter on higher margins from U.S. and non-U.S. operations.

Financials

During the quarter under review, ExxonMobil generated cash flow of $4.8 billion from operations and asset divestments. The company's capital and exploration spending declined 43.6% year over year to $4.8 billion.

At the end of fourth-quarter 2020, total cash and cash equivalents were $4.4 billion and debt amounted to $67.6 billion.

Other News

In a separate release, management announced that the former Petronas president and group CEO Tan Sri Wan Zulkiflee Wan Ariffin joined its board of directors. Notably, Petronas is Malaysia's national oil and gas player.

Guidance

The energy giant expects its capital spending for 2021 to get covered by cashflows with the assumption that Brent crude oil price will be at $50 per barrel mark. Moreover, compared to 2019, this integrated energy firm projects annual structural expense savings of $6 billion by 2023.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month. The consensus estimate has shifted 48.9% due to these changes.

VGM Scores

At this time, Exxon has a poor Growth Score of F, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Exxon has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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