Why Is Exxon (XOM) Up 21.9% Since Last Earnings Report?

It has been about a month since the last earnings report for Exxon Mobil (XOM). Shares have added about 21.9% 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 its most recent earnings report in order to get a better handle on the important catalysts.

ExxonMobil Q3 Earnings Top Estimates, Revenues Miss

ExxonMobilthird-quarter loss per share of 18 cents – excluding identified items – was narrower than the Zacks Consensus Estimate of a loss of 28 cents. In the year-ago quarter, the company reported earnings of 68 cents per share.

Total revenues of $46,199 million missed the Zacks Consensus Estimate of $49,470 and deteriorated from the year-earlier figure of $65,049 million.

The narrower-than-expected loss was owing to higher margins from Chemical business in the United States. This was offset partially by lower oil-equivalent production volumes and commodity prices.

Notably, the company is now planning to slash 1,900 headcount in the United States, primarily at Houston offices. The cost-reduction initiative reflects the company’s plan to combat the coronavirus pandemic since the virus outbreak has hit its products’ demand.

Operational Performance

Upstream

The segment reported quarterly loss of $383 million against a profit of $2,168 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 $681 million against a profit of $37 million in the September quarter of 2019. Moreover, the company reported profits of $298 million from non-U.S. operations, representing a deterioration from $2,131 million in the year-ago quarter.

Production: Total production averaged 3.672 million barrels of oil-equivalent per day (MMBoE/D), lower than 3.899 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 2.286 million barrels per day (MMBbls/D) from 2.392 MMBbls/D in the prior-year quarter. While production from Europe, Africa and Asia declined significantly, it increased in Canada and United States. Moreover, natural gas production was 8.316 billion cubic feet per day (Bcf/d), down from 9.045 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 $36.80 per barrel, lower than the year-ago quarter’s $54.51. The same metric for non-U.S. operations declined to $38.30 per barrel from the year-ago $55.92. Moreover, natural gas prices in the United States were recorded at $1.62 per thousand cubic feet (Kcf), below the year-ago quarter’s $2.03. Similarly, in the non-U.S. section, the metric fell to $3.41 per Kcf from $5.81 in third-quarter 2019.

Downstream

The segment recorded a loss of $231 million against the year-ago profit of $1.2 billion, primarily owing to lower margins in both U.S. and non-U.S. operations since market demand was weak. This 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 $661-million profit, up from $241 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 $4.5 billion from operations and asset divestments, substantially down from $9.5 billion a year ago. The company's capital and exploration spending declined 46.5% year over year to $4.1 billion.

At the end of third-quarter 2020, total cash and cash equivalents were $8.8 billion and debt amounted to $68.8 billion.

Guidance

The energy giant expects capital program for 2021 at $16 billion to $19 billion, below this year’s target of $23 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -252.38% due to these changes.

VGM Scores

Currently, Exxon has a subpar Growth Score of D, 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 second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Exxon has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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