Technology

Why Is Exxon (XOM) Down 2.8% Since Last Earnings Report?

A month has gone by since the last earnings report for Exxon Mobil (XOM). Shares have lost about 2.8% 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 Q2 Earnings Miss Estimates on Weak Oil Price

ExxonMobil reported weak second-quarter results owing to lower oil-equivalent production, coronavirus-induced weak commodity prices and reduced industry refining margins in both U.S. and non-U.S. operations.

The integrated energy giant’s loss per share of 70 cents – excluding identified items – was wider than the Zacks Consensus Estimate of a loss of 63 cents. In the year-ago quarter, the company reported earnings of 73 cents per share.

ExxonMobil’s total revenues of $32,605 million missed the Zacks Consensus Estimate of $36,081 and deteriorated from the year-earlier figure of $69,091 million.

Operational Performance

Upstream

The segment reported quarterly loss of $1,651 million against a profit of $3,261 million a year ago. The downside was owing to lower oil-equivalent production volumes and commodity prices.

Operations in the United States recorded a loss of $1,197 million against a profit of $335 million in the June quarter of 2019. Moreover, the company reported loss of $454 million from non-U.S. operations against the year-ago quarter’s profit of $2,926 million.

Production: Total production averaged 3.638 million barrels of oil-equivalent per day (MMBoE/D), lower than 3.909 MMBoE/D a year ago, reflecting coronavirus-induced drop in fuel demand and curtailment in volumes as mandated by the government.

Liquid production decreased to 2.306 million barrels per day (MMBbls/D) from 2.389 MMBbls/D in the prior-year quarter. While production from the United States, Europe and Africa declined significantly, it increased in Canada and Asia. Moreover, natural gas production was 7.990 billion cubic feet per day (Bcf/d), down from 9.120 Bcf/d a year ago due to lower output from Europe and United States.

Price Realization: In the United States, the company recorded crude price realization of $21.79 per barrel, lower than the year-ago quarter’s $57.95. The same metric for non-U.S. operations declined to $20.91 per barrel from the year-ago $62.47. Moreover, natural gas prices in the United States were recorded at $1.57 per thousand cubic feet (Kcf), below the year-ago quarter’s $2.22. Similarly, in the non-U.S. section, the metric fell to $4.07 per Kcf from $5.84 in second-quarter 2019.

Downstream

The segment recorded an earnings of $976 million, up from the year-ago profit of $451 million, primarily owing to decline in expenses. This was offset partially by lower industry refining margins in both U.S. and non-U.S. operations.

Notably, ExxonMobil's refinery throughput averaged 3.5 MMBbls/D, lower than the year-earlier level of 3.9 MMBbls/D.

Chemical

This unit recorded $467-million profit, up from $188 million in the year-ago quarter on an increase in margin from U.S. operations.

Financials

During the quarter under review, ExxonMobil generated cash flow of $43 million from operations and asset divestments, substantially down from $5.9 billion a year ago. The company's capital and exploration spending declined 34% year over year to $5.3 billion.

At the end of second-quarter 2020, total cash and cash equivalents were $12.6 billion, and debt amounted to $69.5 billion.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted -108.7% 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. Charting a somewhat similar path, 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

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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