Exxon Mobil Corp. needs to regain investor confidence after a couple of shaky quarterly results, but many doubt the third quarter would mark a turnaround for the company and its shares. Exxon XOM, +0.24% is slated to report third-quarter results before the bell on Friday. Wall Street on average rates the stock a hold, with an average price target of $89.63 representing 20% upside over current share prices.
The stock trades at a premium over rival Chevron Corp. CVX, +0.00% on the strength of the company’s balance sheet, which is certainly strong, but investors have started to question whether the premium is entirely justified these days.
All eyes will be on production numbers, which have been weaker in recent quarters. Analysts expect another slip this quarter and better news for Exxon’s chemical and refining side.
“Production has been disappointing for a while,” said Brian Youngberg, an analyst with Edward Jones. “They’ve slipped on the operational side.” A backdrop of higher oil prices earlier in the year is likely to help the third-quarter’s bottom line, although there are many doubts about the direction of oil prices going forward, he said.
Earnings: Analysts surveyed by FactSet expect Exxon to report adjusted earnings of $1.22 a share in the quarter, compared with adjusted earnings of 93 cents a share in the third quarter of 2017. GAAP earnings are expected at $1.24 a share. Estimize, a crowdsourcing platform that gathers estimates from Wall Street analysts as well as buy-side analysts, fund managers, company executives, academics and others, is expecting an adjusted profit of $1.20 a share.
Revenue: Analysts polled by FactSet expect third-quarter sales of $75.68 billion for Exxon, which would compare with sales of $66.17 billion a year ago. Estimize analysts expect sales to reach $72.99 billion. Stock reaction: Exxon shares have lost 6.6% this year, which compares with losses of 0.4% and 0.2% for the S&P 500 index SPX, +0.39% and the Dow Jones Industrial Average. DJIA, +0.50%
The underperformance is more stark on a 12-month span, with Exxon stock down 6.5% versus gains of 3.5% for the S&P and 5.6% for the Dow Jones. Exxon is a Dow component. Other issues: Exxon has long sent a message to investors that it plans for the long run, and it avoids big announcements at earnings. As such, analysts doubt it will announce any guidance or capital expenditure changes as it reports quarterly profits.
It will, however, touch on its major exploration and production projects around the globe. Among the most waited-for are project updates for its Permian Basin holdings in west Texas and, on the international side, discoveries in offshore Guyana. Due to the large size of Exxon’s holdings in the Permian, what Exxon has to say about the basin is viewed as a good indicator of how things are shaping up in the area, said Muhammed Ghulam, an analyst at Raymond James.
Exxon recently made many “significant discoveries” in Guyana, where it operates a consortium alongside subsidiaries of China’s CNOOC Ltd. 0883, -0.15% and Hess Corp. HES, +0.91% so investors will be keen on hearing the latest there, he said. Exxon has reportedly been exploring selling its U.S. Gulf of Mexico assets, according to a Reuters report earlier this month.
The company has also been in the news due to a lawsuit by New York’s attorney general, accusing Exxon of misleading investors about the risks that climate-change regulation would mean for its business. The suit was filed last week, and the investigation began in 2015. Exxon earlier in October said it was putting up $1 million over two years to promote a carbon tax as a way to address climate change. MarketWatch
