What's In Store For ExxonMobil (XOM) This Earnings Season?

ExxonMobil Corporation (NYSE:XOM) is set to release fourth-quarter 2017 results, before the opening bell on Feb 2.

The company surpassed the Zacks Consensus Estimate in three of the last four quarters, the average positive surprise being 8.8%. In the last reported quarter, ExxonMobil’s earnings of 93 cents beat the Zacks Consensus Estimate of 89 cents, courtesy of increased price realizations from liquids and gas and improved margins at the refinery business.

Which Way Are Estimates Headed?

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 fourth-quarter earnings of $1.06 has been revised upward over the last 30 days. It reflects growth of almost 18% from the year-ago quarter.

Further, analysts polled by Zacks expect revenues of $75.3 billion for the quarter, up 23.4% from the prior-year quarter.

Exxon Mobil Corporation Price and EPS Surprise

Exxon Mobil Corporation Price and EPS Surprise | Exxon Mobil Corporation Quote

Factors to Consider

ExxonMobil has a leading position in the energy industry owing to the size and diversity of its asset base, both in terms of business mix and geographical footprint. The company’s balance sheet is one of the best in the industry – with the debt to capitalization ratio of 11.6% being significantly lower than the industry’s ratio of 28.3%.

Upstream Operation: The Zacks Consensus Estimate for earnings after tax from ExxonMobil’s non-U.S. upstream operations stands at $2,424 million, higher than $1,805 million reported in the prior quarter and $1,686 million in the year-ago quarter.

Also, for upstream operations in the domestic region, the Zacks Consensus Estimate for after-tax loss stands at $114 million, significantly narrower than the loss of $238 million and $2,328 million reported in the preceding quarter and year-ago quarter, respectively.

Downstream Operation:For the downstream business, The Zacks Consensus Estimate for earnings after tax from ExxonMobil’s non-U.S. downstream operations is pegged at $802 million, down from respective $1,141 million and $971 million in the prior-quarter and year-ago quarter.

For operations in the United States, the Zacks Consensus Estimate of after-tax earnings stands at $305 million, lower than $391 million in the July-to-September quarter but higher than $270 million in the prior-year quarter.

Earnings Whispers

Our proven model does not conclusively show that ExxonMobil is likely to beat estimates this quarter. That is because a stock needs to have both 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.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -1.47%. This is because the Most Accurate estimate is pegged at $1.05, while the Zacks Consensus Estimate stands at $1.06. 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 #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s negative ESP makes surprise prediction difficult.

Meanwhile, we caution investors against stocks with a Zacks Rank #4 or 5 (Sell-rated) 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 an earnings beat this quarter:

Headquartered in Irving, TX, Pioneer Natural Resources Company (NYSE:PXD) primarily explores oil and gas and hence is an upstream energy player. The company has an Earnings ESP of +4.85% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Headquartered in Houston, TX, Cabot Oil & Gas (NYSE:COG) is also an upstream energy player. The company has an Earnings ESP of +15.15% and a Zacks Rank #1.

Headquartered in Calgary, Canada, Suncor Energy (NYSE:SU) is primarily focused on integrated energy operations. Its Earnings ESP is +12.44% and it sports a Zacks Rank #1.

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