Exxon Q1 2021 Earnings Report Preview: What to Look For

Focus on XOM upstream segment net income

Key Takeaways

  • Analysts estimate adjusted EPS of $0.64 vs. $0.53 in Q1 FY 2020.
  • ExxonMobil's upstream segment is expected to post rising net income YOY, recovering from steep losses in Q4.
  • Companywide revenue is expected to decline, but at a significantly slower pace, as the global economy regains strength.

ExxonMobil Corp. (XOM) suffered a net loss and plunging revenue last year as oil demand plummeted due to the COVID-19 pandemic and resulting economic slowdown. But the global rollout of vaccines is creating signs of economic recovery even as many nations struggle to control the coronavirus. Now, ExxonMobil is positioned to benefit from the recovering global economy as oil prices return to their pre-pandemic levels.

Investors will be watching to see how much Exxon is benefiting from these positive trends when the company reports earnings on April 30, 2021 for Q1 FY 2021. Analysts expect adjusted earnings per share (EPS) to rise for the first time since the final quarter of FY 2018. Revenue is expected to decline for the ninth straight quarter, but at a dramatically slower pace than previous quarters.

Investors will also be focused on another key metric: net income for Exxon's upstream segment, which is focused on the exploration, development, and production of oil and natural gas. In the first quarter, analysts expect the segment's net income to rise rapidly after three consecutive quarters of net losses.

Shares of Exxon have underperformed the market over the past year. However, they have been gaining ground since late October as oil prices started to rebound from the pandemic-induced crash that took place earlier in the year. The stock even started to outperform the market for a few weeks in March before beginning to lag again. Exxon's shares have provided a total return of 39.9% over the past year, below the S&P 500's total return of 46.1%.

One Year Total Return for S&P 500 and Exxon
Source: TradingView.

Exxon Earnings History

Exxon's stock, which was gathering downward momentum in mid-January of 2021, began to take off after Exxon's Q4 FY 2020 earnings report released in early February. Exxon's earnings beat analysts' estimates. It was the first positive adjusted EPS in three quarters, though still down 93.8% compared to the year-ago quarter. Revenue, which missed expectations, fell 30.7%, marking the eighth consecutive quarter of declining revenue.

In Q3 FY 2020, Exxon reported an adjusted loss per share of $0.19, an improvement from the adjusted loss of $0.70 per share in the second quarter. Revenue fell 29.0% compared to the year-ago quarter, continuing a streak of declines that began in the first quarter of FY 2019. Exxon said that oil production continued to be adversely impacted by a shortfall in demand related to the COVID-19 pandemic.

Analysts expect the company's financial results to show improvement in Q1 FY 2021. Adjusted EPS is forecast to grow 19.4%, which would mark the first rise since the final quarter of FY 2018. Revenue is expected to fall 4.5%. It's significant that this would be the slowest decline since revenue first started falling in the first quarter of FY 2019. For full-year FY 2021, analysts expect adjusted EPS of $3.40 compared to an adjusted loss per share of $0.33 in the previous year. Revenue is expected to expand 33.3%, which would be the first increase in three years.

Exxon Key Stats
  Estimate for Q1 2021 (FY) Q1 2020 (FY) Q1 2019 (FY)
Adjusted Earnings Per Share ($)  0.64 0.53 0.55
Revenue ($B) 53.7 56.2 63.6
Upstream Segment Net Income ($B) 2.7  0.5 2.9

Source: Visible Alpha

The Key Metric

As mentioned above, investors will also be focusing on net income for Exxon's upstream segment, which is one of the company's three main business segments. Upstream operations are involved in the exploration and development of oil and natural gas properties as well as the extraction and production of crude oil and natural gas. Upstream may be contrasted with downstream operations, which refer to the production of refined oil products and comprise another one of Exxon's main business segments. Exxon also engages in midstream operations, such as the operation of pipelines and storage facilities.

Exxon's third main business is its chemicals segment, which uses crude oil and natural gas to produce petrochemical feedstocks that are used in making medical equipment, electronics, clothing, vitamin capsules, tires, and many other products. The chemical segment, which was the focus of Investopedia's analysis of last quarter's earnings release, uses oil as an input and thus benefits from lower oil prices. That helped to offset the adverse impact of last year's crash in oil prices on Exxon's upstream and downstream segments, both of which benefit from high demand for crude oil and petroleum products. But with oil prices climbing above $50 per barrel earlier this year, the attention is now shifting to Exxon's upstream segment.

In the final quarter of FY 2019, Exxon's upstream unit posted quarterly net income of $6.1 billion. That was just prior to the outbreak of COVID-19 and before the spread of the virus was declared a pandemic by the World Health Organization. The next quarter, net income in Exxon's upstream business plunged 81.4% year over year (YOY). For the following three quarters, the upstream segment hemorrhaged a total of more than $20 billion in net losses as demand for oil dried up and prices cratered. Analysts are optimistic about Q1 FY 2021. They expect the segment to return to the black with a YOY gain of 404.7% to $2.7 billion. However, that net income would still be less than half the net income the upstream segment produced in Q4 FY 2019. For full-year FY 2021, analysts expect upstream net income of $12.3 billion, a significant rebound from last year's major net loss.

Article Sources
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  1. ExxonMobil Corp. "Quarterly earnings."

  2. Visible Alpha. "Financial Data."

  3. ExxonMobil Corp. "ExxonMobil Reports Results for Third Quarter 2020," Page 1.

  4. ExxonMobil Corp. "Chemical."

  5. CNBC. "WTI Crude (Jun′21)."

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