Exxon Mobil (XOM) Weaker Refining Margins Lower Profit Expected

This reflects a positive earnings surprise of 4.90%.

For the next earning release, Zacks Consensus Estimate expect the company to report earnings of $1.95 per share, reflecting a year-over-year decrease of 14.1%.

On 03 October, XOM has published a regulatory filing that signalled that the slump in oil prices in third quarter where oil prices fell by 17 per cent in the third quarter, the largest quarterly decline in a year, on worries about the global oil demand outlook. Brent futures settled at US$71.77 a barrel on the last trading day of the quarter.

This slump in oil prices could probably reduced ExxonMobil’s third-quarter upstream earnings by US$600 million to US$1 billion,

XOM also indicated weaker refining margins during the quarter would also hurt profits by up to US$1 billion. Global fuel markets have been hit by softer consumer and industrial demand, especially in China where economic growth is slowing and electric vehicle use is on the rise.

On Wednesday (30 Oct) oil prices rose more than 2 per cent, after Reuters reported Opec+ could delay a planned oil production increase scheduled to take effect in December by a month or more, due to concerns about soft oil demand and rising supply.

Exxon Mobil Corporation is heavily invested in LNG, which is experiencing a significant expansion in demand.

Could the increase in oil price recently helped XOM to give a better guidance for Q4?

If we were to see if XOM current stock price is reasonably priced to buy, XOM at its last close price of $116.69 is trading below the estimate of fair value ($208.95).

XOM is trading significantly below fair value by more than 20%.

As XOM has signalled in its regulatory filing in early October, we might be seeing similar lower margins and profit due to the weak third quarter refining margins.

What could help XOM could be in the LNG and this sector is experiencing an expansion, so could this be one of the key revenue contributor for XOM?

In terms of technical, we are seeing XOM trading in response to the oil prices movement, there might be an increase in oil price if OPEC+ decide to cut output, but currently XOM is trading below the short-term MA, which could mean that XOM stock price is in weakness.

If we could see XOM closing in the positive at the end of 31 October (Thursday), then we might have a potential bullish MACD crossover, and XOM could be trading higher when it report its quarterly earnings on 01 Nov (Friday).

If we were to look at how XOM peers in the oil and energy sector have been performing, there have been some weakness, though S&P 500 Energy sector gain +0.23% on Wednesday (30 Oct), the contributors are from smaller energy companies.

I would think we can monitor the price action for XOM if we planned to take an opportunity if XOM earnings surprise in the midst of expected weaker refining margins.

Appreciate if you could share your thoughts in the comment section whether you think XOM would post an earnings surprise if the refining margins came in better.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.