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What's in the Cards for ExxonMobil (XOM) in Q2 Earnings?

Zacks Equity Research

Exxon Mobil Corporation XOM is set to release second-quarter 2019 results, before the opening bell on Aug 2.  

The company’s earnings surpassed the Zacks Consensus Estimate in two of the last four quarters, at an average positive surprise of 2.5%. Let’s see how things are shaping up prior to the quarterly announcement.

Which way are Estimates Treading?

Let’s take a look at the estimate revision trend to get a clear picture of what analysts expect from the earnings release.

The Zacks Consensus Estimate for second-quarter earnings of 76 cents has been revised downward in the past 30 days. The projected figure suggests a decline of 17.4% from the year-ago quarter’s reported number. 

Further, the consensus estimate for revenues is pegged at $67.6 billion, indicating a drop of 8.1% from the prior-year quarter’s tally.

Factors to Consider

The Zacks Consensus Estimate for earnings after tax from ExxonMobil’s non-U.S. upstream operations is pegged at $3,014 million, which suggest an increase from $2,601 million reported in the year-ago quarter. Although earnings from upstream activities outside the domestic market are expected to rise, the effect of seasonal European gas demand might make a negative impact. Notably, since the second quarter of every year is relatively warmer than the first quarter, demand for gas for room heating is sequentially lower in the June quarter. Hence, ExxonMobil anticipates contraction in European gas volumes to hurt its upstream business through the April-to-June quarter of 2019.

For upstream operations in the domestic region, the Zacks Consensus Estimate for after-tax earnings is pegged at $112 million, which calls for a decline from $439 million in the year-ago quarter. The year-over-year downside is likely to be caused by unfavorable crude pricing scenario. 

Moreover, the Zacks Consensus Estimate for the company’s daily refinery throughput is pegged at 3,973 thousand barrels, which indicates a fall from the year-ago quarter’s reported figure of 4,105 thousand barrels. Importantly, ExxonMobil is expecting heavy turnaround activities to hurt its downstream and chemical businesses.

Exxon Mobil Corporation Price and EPS Surprise

 

Exxon Mobil Corporation Price and EPS Surprise

Exxon Mobil Corporation price-eps-surprise | Exxon Mobil Corporation Quote

 

Earnings Whispers

Our proven model does not conclusively show a beat for ExxonMobil in the quarter to be reported. That is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.  

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -9.87%. This is because the Most Accurate Estimate of 69 cents is lower than the Zacks Consensus Estimate that is pegged at 76 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.  

Zacks Rank: ExxonMobil carries a Zacks Rank #5 (Strong Sell).

We caution investors against stocks with a Zacks Rank #4 (Sell) or 5 going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Though an earnings beat looks uncertain for ExxonMobil, here are a few firms that you may want to consider on the basis of our model. These have the right combination of elements to post a beat this quarter:

Williams Companies WMB has an Earnings ESP of +3.60% and a Zacks Rank of 3. The firm is expected to release second quarter earnings on Jul 31. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Encana Corporation ECA has an Earnings ESP of +5.56% and is Zacks #3 Ranked. The company is anticipated to release earnings for the June quarter on Jul 31.

Independence Contract Drilling, Inc. ICD has an Earnings ESP of +18.18% and a Zacks Rank #3. The company is anticipated to release second quarter earnings on Aug 1.

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