Exxon Mobil Q2 preview: Where next for XOM stock?

Oil extraction
Josh Warner
By :  ,  Market Analyst

When will Exxon Mobil release Q2 earnings?

Exxon Mobil will release second quarter earnings before US markets open on Friday July 29.

 

The company will hold a conference call at 0830 CT.

 

Exxon Mobil Q2 earnings consensus

Wall Street forecasts Exxon Mobil will report adjusted earnings of $16.1 billion in the second quarter, up from just $4.7 billion the year before. On a per share basis, the figure is forecast to rise to $3.84 from $1.10 last year.

 

Exxon Mobil Q2 earnings preview

The oil and gas sector is poised to deliver a bumper set of earnings this quarter, with oil and gas prices considerably higher than what we saw the year before as the eruption of war in Ukraine injected significant disruption to the global energy market. Plus, higher prices driven by tight refining capacity means earnings are set to improve markedly from its downstream segment. Below is an outline of what to expect in terms of adjusted earnings from Exxon Mobil’s three key segments:

 

Adj Earnings

Q1 2022

Q2 2021

Q2 2022E

Upstream

$7.7

$3.2

$10.2

Downstream

$0.3

($0.2)

$3.2

Chemical

$1.4

$2.3

$1.4

 

The upstream segment responsible for producing oil and gas will benefit from both higher prices and output. Production is forecast to rise to over 3.72 million barrels per day, up 3.9% from the year before and marking a slight increase from the 3.67 million barrels churned out each day in the first quarter. Meanwhile, analysts believe oil prices averaged over $105 in the quarter, compared to below $62 the year before, while natural gas prices have more than doubled.

 

The biggest sequential improvement will come from the downstream segment that refines oil into a variety of products, with adjusted earnings poised to soar by almost $3 billion. Product sales are forecast to be up some 4% year-on-year and rise 1.6% from the previous quarter and refining margins are expected to have soared thanks to higher prices as customers battle for the limited capacity on offer. Crack spreads – the difference between the cost of refined products and oil – has climbed to their highest level in 40 years in 2022.

 

The chemical division is forecast to see earnings drop from last year amid tighter margins, but they will remain broadly flat from what we saw in the first quarter.

 

The strong overall improvement in earnings should translate to a notable improvement in cashflow, which places the focus on to what Exxon Mobil plans to do with the influx of cash. Free cashflow is forecast to treble from last year in the second quarter to $15.3 billion – which would also be up some $4.4 billion from the previous quarter.

 

Cashflow is more than covering the cost of the quarterly dividend of around $3.7 billion, leading to hopes that the improvement could see share buybacks accelerate markedly in the second quarter. Having bought just $2.1 billion of shares in the first quarter of 2022, we could see it repurchase $3.8 billion worth of shares in the second based on current consensus figures.

 

Where next for XOM stock?

Exxon Mobil shares climbed to fresh all-time highs of $105.60 in June amid another spike in oil prices, but the stock has lost over 14% since then after tracking prices lower over the past six weeks. Having found a floor at $80.70, the stock has been rising in an uptrend over the past two weeks, again thanks to higher commodity prices.

 

The stock is currently testing the 50-day moving average that sit at $91.30, which can be regarded as the first upside target for the stock that needs to be recaptured. Beyond here, it can target a move above $93 to break the level of resistance seen last month before preparing for a more significant rise to over $98 and then close the small gap by returning above $100. The 30 brokers that cover the stock believe Exxon Mobil can recover most of the ground lost since hitting all-time highs last month, with an average target price of over $103.

 

Notably, average trading volumes over the past 10 days, when the stock has found higher ground, have fallen over 18% compared to the 20-day average, which in turn is below both the 30-day and 100-day comparatives. This suggests the current uptrend could struggle to gain momentum, although volumes are likely to explode once the results are released, which could see the earnings provide a catalyst.

 

On the downside, shares could slip to around $89.50 today without disturbing the current uptrend but we could see it slip back toward the 100-day moving average at $88 if it does. From there, we could see shares sink below the $83 mark. The three-month low of $80.70 should be treated as the ultimate floor over the short-term.

 

Exxon Mobil stock is on the rise ahead of Q2 earnings

 

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