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Exxon (XOM) Down 20.6% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Exxon Mobil (XOM). Shares have lost about 20.6% in that time frame, underperforming the S&P 500.

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

ExxonMobil’s Q4 Earnings & Revenues Lag Estimates, Decline Y/Y

ExxonMobil reported unimpressive fourth-quarter 2019 results due to weaker margins in the refining and chemical business. This was partially offset by higher crude price realization and strong upstream production.

The largest publicly-traded integrated U.S. energy company’s earnings per share of 41 cents missed the Zacks Consensus Estimate of 44 cents. Moreover, the bottom line declined substantially from the year-earlier period’s $1.51 per share.

Total revenues of $67,173 million missed the Zacks Consensus Estimate of $69,104 and deteriorated from the year-earlier figure of $71,895 million.

Operational Performance

Upstream

Quarterly earnings of $6.1 billion surged from $3.3 billion a year ago, primarily due to higher oil price realizations. While profits from the United States declined to $68 million in the quarter from the year-ago level of $265 million, the same from non-U.S. operations rose to $6.1 billion from year-ago quarter’s $3 billion.

Production: Total production averaged 4.018 million barrels of oil-equivalent per day (MMBoe/d), marginally higher than 4.010 MMBoe/d a year ago.

Liquid production increased to 2.436 million barrels per day (MMBbls/d) from 2.348 MMBbls/d in the prior-year quarter, courtesy of ramped-up activities in the prolific Permian Basin. While production from the United States rose significantly, it declined in Europe and Africa. Notably, natural gas production was 9.495 billion cubic feet per day (Bcf/d), down from 9.974 Bcf/d a year ago, due to lower output from Europe, Asia, Africa and Australia.

Price Realization:In the United States, the company recorded crude price realization of $55.61 per barrel, higher than the year-ago quarter’s $54.50. The same metric for non-U.S. operations rose to $56.61 per barrel from the year-ago level of $53.74. In contrast, natural gas prices in the United States were recorded at $2.16 per thousand cubic feet (Kcf), lower than the year-ago quarter’s $3.64. Similarly, in the Non-U.S. section, the metric fell to $5.89 per Kcf from $8.18 in fourth-quarter 2018.

Downstream

The segment recorded a profit of $898 million, representing a significant decline of $1,806 million from $2,704 million in the December 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 MMBbls/d, lower than the year-earlier level of 4.3 MMBbls/d.

Chemical

This unit recorded $355-million loss against $737-million profit in the prior-year quarter, owing to soft margins and increased feed costs. The company’s U.S. and Non-U.S. operations in the Chemical segment recorded quarterly losses against profits generated in the year-ago quarter.

Financials

During the quarter under review, ExxonMobil generated cash flow of $9.4 billion from operations and asset divestments, boosted by $3.1-billion Norway upstream asset sales, down from $9.5 billion a year ago. Owing to significant investments in the prolific Permian Basin, the company’s capital and exploration spending rose 8% year over year to $8.5 billion.

At the end of fourth-quarter 2019, total cash and cash equivalents were $3.1 billion, and debt amounted to $46.9 billion.

How Have Estimates Been Moving Since Then?

Estimates revision followed an upward path over the past two months. The consensus estimate has shifted -21.12% due to these changes.

VGM Scores

Currently, Exxon has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 #3 (Hold). We expect an in-line return from the stock in the next few months.



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