ExxonMobil Likely to Report Surge in Q4 Earnings

Results should mirror energy sector's wildly profitable 2022, but slowdown looms

Exxon Mobil logos


ExxonMobil Corp. (XOM), the nation's largest oil producer, probably will say its net earnings surged more than 50% when it reports fourth-quarter financial results Tuesday, capping a year in which high oil and natural gas prices substantially boosted profits throughout the global energy industry.

The world's most valuable public energy company is forecast to report net income of $13.4 billion, or $3.27 per share, with revenue up 31% to $111 billion, according to estimates from Visible Alpha. The company earned $8.8 billion, or $2.06 per share, and recorded revenue of $85 billion in the same quarter a year ago.

ExxonMobil's Key Stats
   Q4 2022 (est)  Q4 2021  Q4 2020
 Adjusted EPS  $3.27  $2.06  $0.03
 Revenue  $111B  $85B  $46.5B
 Gross margin  16.9%  21.5%  9.9%

Source: Visible Alpha

The results should mirror similar sales and profit gains from Exxon's biggest rivals, underscoring the degree to which the war in Ukraine and the economic recovery from the pandemic sent prices for fossil fuels soaring in 2022. Exxon's biggest U.S. competitor, Chevron (CVX), reported Friday its full-year 2022 profit increased 134%.

Oil and natural gas prices moderated in the fourth quarter compared with the months immediately following Russia's February invasion of Ukraine, which disrupted global flows and created spot shortages of those key commodities.

But monthly prices for Brent crude oil, the global benchmark, still averaged $88.75 per barrel in the fourth quarter, up 12% from $79.58 per barrel in the fourth quarter of 2021. And even though U.S. natural gas prices fell throughout the fourth quarter amid warmer-than-expected conditions in the Northern Hemisphere, they concluded 2022 with an average annual increase of 53% compared with 2021.

ExxonMobil's shares in 2022 reflected those price gains. The company's shares rose 27% in the fourth quarter, ending the year with an 89% gain. The S&P 500 Energy Index, by comparison, rose 22% in the fourth quarter and 59% for 2022—the only one of 11 S&P 500 stock market sectors that avoided losses for the year (see chart below).

Exxon Mobil's 12-month stock performance
Source: TradingView.

Historical Post-Earnings Stock Performance

An earnings beat or miss may not be the sole basis for a stock moving higher or lower immediately after earnings are released. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors, such as a poor outlook on future growth expectations, or non-profit factors like daily active users (tech companies) and load factors (airlines). Similarly, unforeseen catalysts, like positive forward guidance or oversold market conditions leading up to earnings can help a stock’s price gain despite an earnings miss.

Over the past 12 quarters, Exxon Mobil’s adjusted EPS has beat consensus expectations nine times. Shares only ended the next trading session higher in six out of those quarters. The average post-earnings move was -0.75%.

Although past performance is not a guarantee of future results, the following graph shows the distribution of Exxon Mobil’s stock price performance on the trading day following its last 12 quarterly earnings announcements. This information provides active traders with context regarding how the stock price might react on the day following its next earnings release.

Moderating Prices = Sales, Earnings Slowdown

Though ExxonMobil garners most of its revenue from so-called downstream operations, such as motor oil and other petroleum products, it generates most of its earnings from upstream operations: oil and gas exploration and production. Surging year-over-year prices for crude oil, typically accounting for 70% to 80% of its upstream business, and natural gas underpinned the company's 2022 profit gains.

However, a disappointing report Friday from competitor Chevron may foreshadow a slowdown in sales and profits throughout the energy sector as year-to-year crude oil and gas price gains dissipate.

Chevron's fourth-quarter earnings failed to meet consensus projections amid rising costs and declining profit in its upstream operations. Despite its announcement earlier this week that it would buy back $75 billion of its stock—equaling about 20% of its market value—its shares fell as much as 5.3% Friday after the surprise earnings miss.

As with Chevron, Exxon's fourth-quarter sales and profit likely will fall from earlier in 2022, when global crude oil prices stayed between $100 to $120 per barrel for six consecutive months after the war in Ukraine began. Revenue at Exxon likely will fall for the second straight quarter, and Visible Alpha's projected net income would represent a 28% drop from the third quarter, when profit almost tripled from the prior year.

In addition, the U.S. Energy Information Administration predicts Brent prices will average $83 per barrel in 2023, down 18% from last year, amid rising global crude inventories. The agency expects natural gas prices will average $4.90 per million British thermal units (BTUs) in 2023, down 24% from a year ago.

In light of those expected price declines and recession concerns for the U.S. economy, investors likely will focus not only on Exxon's fourth-quarter results Tuesday but also on its production plans for 2023.

Article Sources
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  1. CNBC. "Chevron's Annual Profit Doubles to Record $36.5 Billion, but Fourth-Quarter Miss Hits Shares."

  2. U.S. Energy Information Administration. "Europe Brent Spot Price FOB."

  3. The Wall Street Journal. "Natural-Gas Prices Plunge as Unseasonably Warm Weather is Forecast."

  4. Yahoo! Finance. "Exxon Mobil Corporation (XOM)."

  5. S&P Dow Jones Indices. "S&P 500 Energy."

  6. Statista. "Exploration and Production Revenue of ExxonMobil from 2014 to 2021, by Fossil Fuel Type."

  7. SeekingAlpha. "Chevron Slips After Q4 Earnings Miss Expectations in Record Full Year." (Account required.)

  8. Reuters. "Chevron Annual Profit Hits Record but Q4 Miss Hits Shares."

  9. Bloomberg. "Chevron to Buy Back $75 Billion in Stock After Record Profit."

  10. Statista. "Average Monthly Brent Crude Oil Price from October 2020 to October 2022."

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