Oil Stocks Q3 Earnings Slated On Oct 28: XOM, CVX, PSX, IMO

The Q3 earnings season is in full swing with 198 S&P 500 members already having reported their quarterly results.

Picture So Far

The 198 S&P 500 Index members that have revealed their Q3 financial performance so far account for 40% of the index’s total market capitalization. Total earnings for these companies have grown 3.2% from the year-ago period on 1.9% higher revenues. While 73.7% of the companies beat earnings estimates, 61.1% outperformed on the top-line front (data from the Earnings Trends report dated Oct 26, 2016).

Will the Energy Sector Continue to Suffer?

The energy sector has been a drag on the overall market over the past few quarters and the situation is unlikely to change even in this earnings cycle. Per the latest Earnings Trends report, the general outlook remains bearish as the sector is expected to register a massive 71% year-over-year decrease in earnings due to a 12.2% decline in revenues. Excluding the impact of the energy sector, the S&P 500 Index would witness earnings growth of 5% on the back of 2.8% increase in revenues.

Crude Performance in Q3

Given that oil determines the fate of energy companies, it is of utmost importance to note the pricing movement of the commodity during Q3. Overall, oil prices recovered significantly from the mid-February lows. This is undoubtedly favorable for upstream energy firms as commodity price improvement should translate into more exploration and production activities. This is evidenced by the substantial increase in the U.S. rig count in recent times.

In fact, Baker Hughes Inc. (NYSE:BHI) – the company’s data issued since 1944 is as an important yardstick for energy service providers in gauging the overall business environment of the oil and gas industry – recently declared the rig count for Sep 2016. In the U.S., the total number of rigs increased from the Aug 2016 count owing to a rise in the number of land rigs. This represents the fourth consecutive increase in the U.S. monthly rig count.

The developments are definitely favorable for the upstream business of integrated energy players as these companies are able to sell the commodity at higher prices. However, the crude pricing scenario is weaker than the prior-year quarter.

Furthermore, the downstream business of these integrated players might be affected by the year-over-year decline retail gasoline prices. Although the refining businesses were able to buy crude at comparatively lower prices than the prior year, these could not make substantial profits as the selling price of the end products like gasoline was low.

However, the overall earnings picture will become clearer as we move further ahead. With more companies set to release their financial numbers, we expect a better insight into the performance of the sector. Meanwhile, let’s take a look at how these four oil stocks might fare in Q3 when these report their quarterly numbers on Oct 28.

What’s in Store for these Oil Stocks?

Oil giant ExxonMobil Corporation (NYSE:XOM) is expected to report Q3 earnings before the opening bell.

Last quarter, the company delivered a negative earnings surprise of 35.94%. Nonetheless, ExxonMobil posted an average positive earnings surprise of 8.95% over the last four quarters.

Our quantitative model does not show conclusively that ExxonMobil is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat on earnings. Unfortunately, this is not the case here as ExxonMobil has an Earnings ESP of 0.00% and a Zacks Rank #3. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Please note that the Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement. (Read more: ExxonMobil: What's in Store this Earnings Season?)

U.S.energy giant Chevron Corp. (NYSE:CVX) is set to release Q3 results before the opening bell.

Last quarter, the company delivered a positive earnings surprise of 54.84%. Nonetheless, Chevron posted an average negative earnings surprise of 50.30% over the last four quarters.

Our proven model does not conclusively show that Chevron will beat estimates this quarter. This is because the company has a Zacks Rank #2 but an Earnings ESP of - 2.56%.

Phillips 66 (NYSE:PSX) is expected to report Q3 earnings before market opens. In the last reported quarter, the company’s earnings of 94 cents per share beat the Zacks Consensus Estimate of 91 cents. Nonetheless, the company outpaced the Zacks Consensus Estimate in three of the last four quarters with an average earnings beat of 4.98%.

Our proven model does not conclusively show that Phillips will beat estimates this quarter. This is because the company has a Zacks Rank #3 but an Earnings ESP of 0.00%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Integrated energy player Imperial Oil Ltd. (TO:IMO) will likely report earnings before the opening bell. Over the last four quarters, the company posted an average negative earnings surprise of 37.90%.

Our proven model does not conclusively show that Imperial Oil will beat estimates this quarter. This is because the company has a Zacks Rank #3 but an Earnings ESP of 0.00%.

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