Exxon, Chevron earnings preview: Oil giants under the microscope as profit booms

As a tailwind, however, Exxon
XOM,
+2.16%,
Chevron
CVX,
+1.32%
and other energy companies are enjoying commodity prices that remain healthy, which could offset higher costs, analysts at Goldman Sachs said in a recent note.

Second-quarter results for both companies are likely to be “extremely strong” compared to second quarter of 2021, said Stewart Glickman at CFRA Research.

“They have the wind at their backs on two fronts,” he said. Their “upstream” business, oil and gas exploration and production, enjoyed much better pricing with the U.S. benchmark crude oil up about 65% in the year, and “natural gas comparisons are even better.”

Their downstream business, mostly refining, enjoyed improved volumes, “much better” margins, and other positives, Glickman said.

“The big question is where all the excess cash flow is going to go,” he said. Increased returns to shareholders are “likely,” with dividends first and buybacks probably second, Glickman said.

Exxon and Chevron are slated to hold calls with analysts following their results.

Here’s what to expect:

Earnings: Analysts polled by FactSet expect Exxon to report adjusted earnings of $3.84 a share in the second quarter, which would compare with adjusted earnings of $1.10 a share in the second quarter of 2021.

Estimize, a crowdsourcing platform that gathers estimates from Wall Street analysts as well as buy-side analysts, fund managers, company executives, academics and others, is expecting an adjusted profit of $3.75 a share for Exxon.

For Chevron, the FactSet analysts call for adjusted earnings of $5.08 a share, which would compare with earnings of $1.71 a share in the second quarter of 2021. The Estimize call for Chevron earnings is $5.09 a share.

Revenue: The analysts surveyed by FactSet are calling for sales of $111.3 billion for Exxon, which would be a 64% increase from $67.7 billion in the second quarter of 2021. Estimize is expecting $110 billion in revenue for the quarter.

Revenues around expectations would be Exxon’s largest quarterly sales since the third quarter of 2011, when the oil giant posted revenue of $112 billion.

Exxon posted a record revenue in the second quarter of 2008 of $124.24 billion, and a record net income in the second quarter of 2012 of $15.91 billion dollars.

For Chevron, the analysts polled by FactSet expect revenue of $58.7 billion, which would compare with revenue of $37.6 billion in the year-ago period, a 56% increase. Estimize sees Chevron’s revenue at $58.5 billion.

A revenue around expectations would be Chevron’s highest quarterly revenue since the second quarter of 2012, when sales hit $59.5 billion.

Chevron’s reported a record revenue of $81 billion also in the second quarter of 2008. Chevron hit a record net income the following quarter that year of $7.89 billion.

Stock price: Exxon and Chevron shares have been the rare spot of green on stock tables this year. Exxon has gained about 46% so far this year, and Chevron is up 25%. That contrasts with losses of around 18% for the S&P 500 index
SPX,
+2.62%
in the same period.

What else to expect: Exxon said earlier this month it expected a boost of at least $2.5 billion to its bottom line in the second quarter from rising prices for oil and gas, with billions more coming from higher margins for gasoline and other energy products.

Exxon’s statement “points to earnings around 50% above market consensus at the mid-point of guidance,” with refining a “key driver,” analysts at Citi said in an earlier note.

“The majority of the uplift comes from the capture of record refining margins in the quarter,” they said. They pegged Exxon’s free cash flow at a “record” $17 billion, with some of it going to fund dividend and share buybacks in the quarter.

“Beyond these shareholder distributions we see deleverage as the principal use of excess funds, strengthening the balance sheet with a view to taking advantage of opportunities that may present in the next cycle,” the Citi analysts said.

For Chevron, the Citi analysts predict “record quarterly earnings, buoyed by oil and gas prices, record refining and an unwind of some of the downstream timing effects that impacted on 1Q.”

They called for an unchanged 2022 capital expenditure guidance of $15 billion, with inflation in the Permian, about 20% of the overall budget, “being absorbed elsewhere in the business,” they said.

Both companies have weathered criticism from the White House amid rising fuel prices. President Joe Biden has criticized oil companies including Exxon and Chevron directly.

In June, he said that Exxon “made more money than God this year.” The president also said that Chevron Chief Executive Michael Wirth was “mildly sensitive” after the executive penned a letter to the White House saying that oil companies have been vilified.