What's In The Offing For ExxonMobil (XOM) In Q3 Earnings?

Exxon Mobil Corporation (NYSE:XOM) is set to release third-quarter 2018 results, before the opening bell on Nov 2.

The company missed the Zacks Consensus Estimate in three of the last four quarters, the average negative earnings surprise being 10.9%. In the last reported quarter, ExxonMobil’s earnings of 92 cents missed the Zacks Consensus Estimate of $1.26, thanks to a plunge in oil equivalent production.

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 third-quarter earnings of $1.21 has been stable over the last seven days. It reflects growth of 30.1% from the year-ago quarter.

Further, the consensus estimate calls for revenues of $72.5 billion, showing a 9.5% rise from the prior-year quarter.

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 9.7% being significantly lower than the industry’s ratio of 25.6%.

Upstream Operation: The Zacks Consensus Estimate for earnings after tax from ExxonMobil’s non-U.S. upstream operations stands at $3,542 million, higher than $2,601 million reported in the prior quarter and $1,805 million in the year-ago quarter.

Also, for upstream operations in the domestic region, the Zacks Consensus Estimate for after-tax earnings is pegged at $616 million, higher than $439 million in the June quarter of 2018. In the year-ago quarter, the domestic business reported a loss of $238 million.

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 $930 million, down from $1,141 million in the year-ago quarter, but up from $695 million in the prior quarter.

For operations in the United States, the Zacks Consensus Estimate for after-tax earnings stands at $455 million, higher than $391 million in the July-to-September quarter of 2017 and $29 million in the prior quarter.

Although strong oil prices will likely support the largest publicly traded integrated energy firm’s upstream businesses, higher commodity prices were unfavorable for refining activities — reflected in the projected drop in year-over-year contributions from non-U.S. downstream operations.

Earnings Whispers

Our proven model does not conclusively show a beat for ExxonMobil this earnings season. 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) for this to happen. That is not the case here as you will see below.

Earnings ESP: Earnings ESP is 0.00% as the Most Accurate Estimate and the Zacks Consensus Estimate stand at $1.21. 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 #2. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s earnings ESP of 0.00% 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:

Enbridge Inc. (NYSE:ENB) has an Earnings ESP of +5.26% and a Zacks Rank #1. The company is anticipated to release earnings on Nov 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

NOW Inc. (NYSE:DNOW) has an Earnings ESP of +5.61% and a Zacks Rank #2. The company is anticipated to report earnings on Nov 1.

Carrizo Oil & Gas, Inc. (NASDAQ:CRZO) has an Earnings ESP of +0.18% and a Zacks Rank #2. The company is expected to release earnings on Nov 5.

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