Exxon Q3 FY2021 Earnings Report Preview: What to Look For

Focus on XOM upstream segment revenue

Key Takeaways

  • Analysts estimate EPS of $1.47 vs. -$0.16 in Q3 FY 2020.
  • Upstream revenue is expected to rise dramatically YOY.
  • Revenue is expected to post a healthy gain amid the ongoing global economic recovery and higher oil prices.

ExxonMobil Corp. (XOM) has returned to profitability this year after its revenue plunged by nearly a third last year amid the economic disruptions caused by COVID-19 pandemic. The company's rebound in 2021 has been driven by rising oil prices, which reached a seven-year high earlier this month. Oil prices are being fueled both by a recovering global economy and by oil demand that's outpacing supply.

Investors will be watching to see if Exxon can maintain the momentum of its recent financial performance when the company reports earnings on Oct. 29, 2021 for Q3 FY 2021. Analysts expect Exxon to post its third straight quarter of positive earnings per share (EPS) after four consecutive quarters of losses per share. Revenue is forecast to rise for the third straight quarter following eight quarters of shrinking revenue.

Investors will also be focused on another key metric: revenue for Exxon's upstream segment, which is involved in the exploration, development, and production of oil and natural gas. Analysts expect upstream revenue to rise dramatically for the third straight quarter after seven consecutive quarters of declines.

Shares of Exxon have outperformed the broader market over the past year by a wide margin. The stock began to pull ahead of the market in early November 2020 and then gradually widened its outperformance gap until around mid-March 2021. The stock then traded in wide swings as it has moved mostly sideways through much of the spring and summer. The stock has been rising again since around mid-September. Exxon's shares have provided a total return of 109.6% over the past year, well above the S&P 500's total return of 34.2%.

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

Exxon Earnings History

Exxon reported Q2 FY 2021 earnings and revenue that beat analyst expectations. The company reported its second straight quarter of positive EPS following a string of four consecutive quarters of losses per share through FY 2020 amid the economic downturn triggered by the pandemic. Revenue rose 107.8% year over year (YOY), the second straight quarter of growth after two straight years of quarterly YOY declines. Exxon said that its earnings were driven by oil and natural gas demand as well as the best-ever quarterly contributions from its chemical and lubricant products.

In Q1 FY 2021, Exxon's earnings and revenue surpassed consensus estimates. It was the first quarter of positive EPS after a full year of quarterly losses per share in FY 2020. Revenue grew just 5.3%, but that growth ended the streak of eight straight quarterly declines. The company said that its strong results in the first quarter reflected higher commodity prices as well as structural cost reductions.

Analysts expect the company's financial performance to continue improving in Q3 FY 2021. Exxon is expected to post its largest EPS in at least 15 quarters. Revenue is forecast to rise 49.3% YOY, slowing from the previous quarter's rapid pace. For full-year FY 2021, analysts expect Exxon's EPS to be positive after last year's loss per share. Annual revenue is expected to grow 56.0% after two consecutive years of declines.

Exxon Key Stats
  Estimate for Q3 FY 2021 Q3 FY 2020 Q3 FY 2019
Earnings Per Share ($) 1.47 -0.16 0.74
Revenue ($B) 69.0 46.2 65.0
Upstream Segment Revenue ($B) 17.5 10.1 16.1

Source: Visible Alpha

The Key Metric

As mentioned above, investors will also be focusing on revenue 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 upstream segment benefits from high crude oil prices and suffers when oil prices plunge, as they did early last year in the early stages of the pandemic. But oil prices have sharply rebounded this year, rising to levels not seen in years amid strong demand fueled by a recovering economy. The increase in prices has also been exacerbated by the slow ramp up of supply by the Organization of the Petroleum Exporting Countries (OPEC) and a group of Russia-led oil producers, collectively called OPEC+. A number of producers from OPEC+ cut production during the pandemic and have been slow to ramp up supply to meet the recovering demand, even amid pressure from the U.S. to increase production.

Exxon's upstream revenue plummeted 39.7% last year amid the economic shock caused by the pandemic. Oil prices were hammered in the spring of 2020 as global demand dried up. But even before the pandemic, the company's upstream revenue had been suffering. Revenue in the upstream segment had fallen 6.8% in FY 2019 after rising 22.9% in FY 2018. But this can also largely be explained by lower oil prices throughout most of 2019 compared to 2018. Upstream revenue began to recover in Q1 FY 2021, rising 15.7% YOY and ending a streak of seven quarters of declines. Revenue rose by 141.0% YOY in Q2 FY 2021, returning to pre-pandemic levels seen in the second half of 2019. Analysts expect upstream revenue to expand 72.3% YOY in Q3 FY 2021. For full-year FY 2021, revenue for the segment is expected to rise 79.9%.

Article Sources

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