Key Takeaways

  • Analysts estimate EPS of $0.96 vs. -$0.25 in Q2 FY 2020.
  • The upstream segment is expected to post net income in Q2 compared to a net loss in the year-ago quarter.
  • Revenue is expected to rise dramatically as the economy and oil prices continue to recover.

ExxonMobil Corp. (XOM) returned to profitability in the first quarter of this year after suffering steep losses in 2020 due to the economic shock triggered by the onset of the COVID-19 pandemic. But despite that turnaround, the company's strategic direction remains uncertain. Shareholders recently elected three new members to the company's board who are expected to push oil-focused Exxon to reduce its carbon footprint.

Investors will be focused on Exxon's financial performance, as well as any management comments on climate initiatives, when the company reports earnings on July 30, 2021 for Q2 FY 2021. Analysts expect Exxon to post its second straight quarter of positive earnings per share (EPS) after four straight quarterly losses through FY 2020. Revenue is expected to rebound sharply from last year's pandemic-depressed lows.

Investors will also be focused on another key metric: net income for Exxon's upstream segment, which is involved in the exploration, development, and production of oil and natural gas. Analysts expect Exxon to report its second straight quarter of net income in its upstream segment after three straight quarters of net losses.

Exxon's shares have outperformed the broader market over the past year. The stock spent the first half of the past year lagging the market's performance. But it began to turn around in early February of this year, when Exxon reported earnings for the final quarter of 2020. The shares trended higher through late June. The shares have given up some of their gains since then, but still led the market. They have provided a total return of 44.1% over the past year, above the S&P 500's total return of 36.7%.

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

ExxonMobil Earnings History

The stock jumped after Exxon reported Q1 FY 2021 earnings that beat consensus estimates. The company posted its first positive EPS since the final quarter of FY 2019 after four straight quarterly losses per share. Revenue grew 5.3% year over year (YOY), marking the first growth since Q4 FY 2018. Exxon said that its strong results were a reflection of higher commodity prices as well as lower costs. The company also highlighted the launch of its Low Carbon Solutions business, which is developing carbon capture and storage solutions.

In Q4 FY 2020, Exxon posted a loss of $4.70 per share, its biggest quarterly loss per share during the pandemic. Revenue sank 30.7% compared to the year-ago quarter, marking the eighth consecutive quarter of revenue declines. "The past year presented the most challenging market conditions ExxonMobil has ever experienced," said Chairman and CEO Darren W. Woods, citing the pandemic as having a significant impact on the company's results in FY 2020.

Analysts expect Exxon's financial performance to continue recovering in Q2 FY 2021. The company is expected to post its second straight quarter of positive EPS. Revenue is forecast to rise 88.9%, sharply rebounding from last year's low point. For full-year FY 2021, analysts forecast that Exxon will post its highest annual EPS since FY 2018 after a sizeable loss per share last year. Annual revenue is expected to rise 48.6% after two straight years of declines.

ExxonMobil Key Stats
  Estimate for Q2 2021 (FY) Q2 2020 (FY) Q2 2019 (FY)
Earnings Per Share ($) 0.96 -0.25 0.73
Revenue ($B) 61.6 32.6 69.1
Upstream Segment Net Income ($B) 3.1 -1.7 3.3

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 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.

The company's upstream segment posted $14.4 billion in positive net income in FY 2019, then swung to a net loss of $20.0 billion in FY 2020. The brunt of the impact was felt in the final quarter of the year, in which the segment posted a net loss of $18.5 billion. The upstream segment recorded $19.0 billion worth of impairments in Q4. As oil prices have risen in 2021, Exxon's upstream segment has been recovering. The segment's net income rose 376.5% in Q1 FY 2021 compared to the year-ago quarter, ending the three-quarter streak of net losses. Analysts are expecting further improvement in Q2 FY 2021, estimating net income for the upstream segment to nearly return to the level recorded in the second quarter two years ago, before the pandemic. For full-year FY 2021, analysts expect a sharp rebound in net income from last year's huge net loss.