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Exxon (XOM) Down 5.5% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

It has been about a month since the last earnings report for Exxon Mobil (XOM). Shares have lost about 5.5% 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 catalysts.

ExxonMobil Q2 Earnings Top Estimates on Permian Volumes

Exxon Mobil Corporation reported better-than-expected results for second-quarter 2019, courtesy of ramped up liquid volumes in the prolific Permian Basin. This was offset partially by scheduled downtime activities in downstream and chemical operations.

This largest publicly-traded integrated energy company’s earnings per share of 73 cents surpassed the Zacks Consensus Estimate of 68 cents. However, the bottom line declined substantially from the year-earlier 92 cents.

Total revenues of $69,091 million beat the Zacks Consensus Estimate of $65,765. However, the top line deteriorated from the year-ago quarter’s $73,501 million.  

Operational Performance

Upstream: Quarterly earnings of $3.3 billion improved from $3 billion a year ago, thanks to an increase in oil equivalent production volumes, partially offset by lower price realizations from liquids and an increase in expenses related to maintenance and exploration in the international market.

Total production averaged 3.909 million barrels of oil-equivalent per day (MMBOE/d), higher than 3.647 MMBOE/d a year ago.

Liquid production increased year over year to 2.389 million barrels per day (MMB/D) from 2.212 MMB/D, courtesy of ramped-up activities in the prolific Permian Basin. Also, natural gas production was 9.120 BCF/d (billions of cubic feet per day), up from 8.613 BCF/d a year ago.

Downstream: The segment recorded a profit of $451 million, representing a significant decline from $724 million in the June quarter of 2018. The underperformance can be attributed to scheduled maintenance activities and contraction in industry’s fuel margins. 

ExxonMobil's refinery throughput averaged 3.9 million barrels per day (MMB/D), lower than the year-earlier level of 4.1 MMB/D.

Chemical: This unit contributed to the company’s $188 million profit, down from $890 million in the prior-year quarter, induced by soft margins and scheduled maintenance activities.

Financials

During the quarter under review, ExxonMobil generated cash flow of almost $6 billion from operations and asset divestments, down from $8.1 billion a year ago. Owing to significant investments in the prolific Permian Basin, the company’s capital and exploration spending shot up 22% year over year to $8.1 billion.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month. The consensus estimate has shifted -8.23% due to these changes.

VGM Scores

Currently, Exxon has an average Growth Score of C, though it is lagging a lot 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 top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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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