Exxon and Chevron earnings preview: Oil giants under the microscope as profits soar

0

Exxon Mobil Corp. and Chevron Corp. are expected to release their second-quarter results on Friday before the bell as their booming earnings and revenue remain under heightened scrutiny and rising costs and falling demand are risks ahead.

Investors are likely to keep an eye out for a possible increase in forecasts for the oil and gas majors and any telegraphed messages about their 2023 growth expectations amid fears that a global recession could pinch energy demand.

As a tailwind, however, Exxon XOM,
+1.25%,
CVX rafters,
+0.93%
and other energy companies are benefiting from commodity prices that remain healthy, which could offset rising costs, Goldman Sachs analysts said in a recent note.

“Given the strong cash generation, we expect a number of companies to report continued progress in return on capital, and we are focused on any additional comments on easing pressures on costs,” they said.

ExxonXOM,
+1.25%
and Chevron CVX,
+0.93%
are scheduled to hold calls with analysts following their findings.

Here’s what to expect:

Earnings: Analysts polled by FactSet expect Exxon to report adjusted earnings of $3.84 per share in the second quarter, which would compare to adjusted earnings of $1.10 per share in the second quarter of 2021.

Estimize, a crowdsourcing platform that gathers estimates from Wall Street analysts as well as buy-side analysts, fund managers, corporate executives, academics and others, expects adjusted earnings of $3.75 per share for Exxon.

For Chevron, FactSet analysts forecast adjusted earnings of $5.08 per share, which would compare to earnings of $1.71 per share in the second quarter of 2021. The Estimize call for Chevron’s earnings is $5.09 per share.

Revenue: Analysts polled by FactSet forecast sales of $111.3 billion for Exxon, which would represent a 64% increase from $67.7 billion in the second quarter of 2021. Estimize expects $110 billion in revenue for the quarter.

Revenue around expectations would be Exxon’s biggest quarterly sales since the third quarter of 2011, when the oil giant posted revenue of $112 billion. Exxon posted record second-quarter 2008 revenue of $124.24 billion and record second-quarter 2012 net profit of $15.91 billion.

For Chevron, analysts polled by FactSet expect revenue of $58.7 billion, which would compare to revenue of $37.6 billion a year ago, an increase of 56%. Estimize sees Chevron’s revenue at $58.5 billion.

Revenue around expectations would be a far cry from Chevron’s record revenue of $81 billion also in the second quarter of 2008. Chevron hit a record net profit the following quarter that year of $7.89 billion of dollars.

Stock price: Exxon and Chevron stocks have been the few green spots on the stock market tables this year. Exxon has gained about 46% so far this year, and Chevron is up 25%. This contrasts with losses of around 18% for the S&P 500 SPX index,
+1.40%
in the same period.

What else to expect: Exxon said earlier this month that it expected at least a $2.5 billion increase in second-quarter net income on the back of higher oil and gas prices, with billions additional from higher margins for gasoline and other energy products.

Exxon’s statement “indicates earnings about 50% above market consensus mid-term guidance,” with a sharpened “key driver,” Citi analysts said in a previous note.

“Most of the upside came from capturing record refining margins in the quarter,” they said. They pegged Exxon’s free cash flow at a “record” $17 billion, some of which will be used to fund dividends and stock buybacks in the quarter.

“Beyond these distributions to shareholders, we see deleveraging as the primary use of excess funds, strengthening the balance sheet to take advantage of opportunities that may arise in the next cycle,” Citi analysts said.

For Chevron, Citi analysts predict “record quarterly earnings, supported by oil and gas prices, record refining and a resolution of some of the downstream timing effects that impacted the first quarter.”

They called for unchanged capital spending of $15 billion for 2022, with inflation in the Permian, or about 20% of the overall budget, “being absorbed elsewhere in the business”, they said.

Both companies have resisted criticism from the White House amid rising fuel prices. President Joe Biden has directly criticized oil companies, including Exxon and Chevron.

In June, he said Exxon “made more money than God this year.” The president also said Chevron chief executive Michael Wirth was “moderately sensitive” after the executive wrote a letter to the White House saying oil companies had been vilified.

Share.

Comments are closed.