ExxonMobil Q3 Earnings Preview: Massive Gains to Upstream Income

Focus on XOM upstream segment net income

Key Takeaways

  • Analysts estimate ExxonMobil will report earnings per share (EPS) of $3.59 vs. $1.58 in Q3 FY 2021.
  • Upstream segment net income for the oil giant is expected to more than triple that of Q3 FY 2021.
  • Revenue for ExxonMobil is expected to rise for a seventh straight quarter.

ExxonMobil Corp. (XOM), the world's second-largest oil and gas company by market value, will probably say earnings more than doubled in the third quarter amid surging oil and gas prices.

Exxon's earnings per share (EPS) probably jumped 128% year-over-year to $3.59 while revenue climbed by more than 53% for the seventh consecutive quarter to $113.6 billion, according to average estimates from Visible Alpha.

Energy companies have reported record earnings this year on significant natural gas business from Europe following Russia's invasion of Ukraine. Oil and gas prices spiked earlier in the year, prompting actions by the Biden administration to release holdings from the Strategic Petroleum Reserves to bring down prices. Exxon widening profit margins, the target of political criticism this year, come even as its refining and chemicals businesses weaken.

Net income from the company's upstream segment, a key metric that tracks the exploration, development, and production of oil and natural gas, is expected to triple for Q3, albeit at the slowest pace in three quarters.

Exxon shares have climbed by 70% in the past year, compared with a 16% drop for the S&P 500 Index (see chart below).

One-Year Total Return for S&P 500 and ExxonMobil

Exxon Earnings History

Exxon's profit fell for five consecutive quarters starting in the fourth quarter of 2018 and then swung to losses in each quarter of 2020. That trend reversed in the last six quarters, when with EPS often surpassed pre-pandemic levels.

The company's revenue declined for eight quarters in 2019 and 2020, accelerated in 2021 and then cooled again. Predicted revenue growth in the third quarter is below the prior-year quarter and a slowdown relative to the most recent quarter.

ExxonMobil Key Stats
  Estimate for Q3 FY 2022 Q3 FY 2021 Q3 FY 2020
Earnings Per Share ($) 3.59 1.58 -0.15
Revenue ($B) 113.6 73.8 46.2
Upstream Segment Net Income ($B) 3.2 0.9 -0.7

Source: Visible Alpha

The Key Metric

Exxon's upstream business is one of the company's three main segments. The operations cover the exploration and development of oil and natural gas properties as well as the extraction and production of crude oil and natural gas. Downstream operations, by contrast, refer to the production of refined oil products. Exxon also engages in midstream operations, such as the operation of pipelines and storage facilities.

Exxon's upstream business has performed inconsistently in recent years. Like earnings, it dropped for five consecutive quarters in 2018 and 2019 before experiencing losses throughout 2020. Upstream business mounted a significant comeback in 2021, surging past pre-pandemic levels. This rapid growth has continued but has slowed considerably since Q1 2022. Analysts expect upstream net income to more than triple for Q3, about half the pace of growth of just two quarters earlier.

Article Sources
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  1. Visible Alpha. "Financial Data."

  2. Barron's. "Big Oil Is About to Announce Stunning Earnings. There Could Be a Political Backlash." (Subscription required.)

  3. CompaniesMarketCap.com. "Largest Oil and Gas Companies by Market Cap."

  4. CNBC. "Biden Tells Oil Companies in Letter 'Well Above Normal' Refinery Profit Margins Are 'Not Acceptable'."

  5. Reuters. "Exxon Signals Strong Q3 Earnings on Natural Gas Pricing."

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