Coming off record profits in the second-quarter, Exxon Mobil (XOM) and Chevron (CVX) are expected to again see Q3 earnings skyrocket when they report later this week. Capital spending guidance from the two energy giants will be will be of crucial interest, as U.S. oil producers have sat on their hands, keeping production essentially flat, while gasoline and diesel prices soar. Both Exxon Mobil stock and Chevron shares edged up Wednesday.
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Now with recession and possible demand destruction in the forecasts, it remains to be seen whether Exxon Mobil and Chevron will heed President Joe Biden and increase production or follow OPEC’s lead and keep the production reins tight.
In early October, the Organization of the Petroleum Exporting Countries and its key allies including Russia, known as OPEC+, decided to cut their oil production by 2 million barrels per day in November. The group had been warning of a possible production cut, due to forecasts calling for economic slowing and a lower outlook for energy demand.
Meanwhile, Biden has been releasing millions of barrels of oil from the U.S. Strategic Petroleum Reserve, attempting to hold down U.S. oil and fuel costs ahead of the looming midterms elections.
“My message to oil companies is: You’re sitting on record profits, and we’re giving you more certainty. So you can act now to increase oil production now,” Biden said during an Oct. 19 speech.
U.S. crude futures jumped more than 3% to more than $88 a barrel Wednesday as U.S. exports hit record levels and refineries ran at particularly strong levels. Meanwhile, U.S. natural gas prices recovered from an early dive to trade up around $5.68 per million British thermal units. Last week, futures dropped below $5 per million Btu to the lowest prices in seven months.
Oil Companies Prioritize Buybacks Over Production Gains
On Wednesday, the average price of gasoline at the pump was $3.76, according to AAA — around 12% above year-ago levels.
Exxon Mobil Stock: Earnings
Estimates: Wall Street forecasts earnings per share surging 140% to $3.80 per share. Analysts predict sales vaulting 42% to $104.6 billion. Wall Street is also predicting capital expenditures coming in at $5 billion in Q3, an increase of 72% year over year, according to FactSet.
Results: Check Friday morning.
Exxon Mobil stock advanced 1.2% during Wednesday market trading. XOM shares are trading in a buy zone above a 105.67 buy point, according to MarketSmith. Trading volume on the breakout has remained well below 40% of its 50-day average, the threshold to confirm a breakout.
XOM stock has been outperforming the S&P 500 since it made a strong move on Oct. 13.
In early October, Irving, Texas-based Exxon signaled natural gas prices would support strong third-quarter demand expectations. Despite steep growth estimates, the energy giant projects it will not match its Q2 profits as oil prices have retreated along with refining and chemical segment profits.
In Q2, Exxon Mobil earnings soared 276% to $4.14 per share. Sales spiked 70% to $115.7 billion. Exxon Mobil’s capital investments totaled $9.5 billion for first half of 2022. Management said this was in line with its full-year guidance of $21 billion-$24 billion.
Jefferies analyst Lloyd Byrne on Oct. 18 upgraded XOM stock to Buy from Hold with a price target of $133, up from $90.
Byrne said Exxon has cut capital expenditures from its recent highs of $31 billion in 2019. He expects spending will be about $17 billion in 2022, well below the company’s estimates.
“We continue to be positive on Exxon across its divisions, as we see strong but targeted upstream growth in high-value and low-cost projects,” Byrne wrote. He added that he sees “higher exposure to downstream elements enabling the company to capitalize on higher mid-cycle refining margins, and an energy transition strategy that plays to its strengths.”
Exxon Mobil stock has a perfect Composite Rating of 99. It has a 97 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share-price movement. The EPS Rating is 80.
Chevron Earnings
Estimates: Analysts expect earnings to grow 63% to $4.82 per share. Wall Street forecasts revenue jumping 28% to $57.4 billion. Chevron’s capital expenditure is predicted to be a little more than $3 billion in Q3, slowing to 7% growth year over year, according to FactSet.
Results: Check Friday before the market opens.
Chevron shares were up 1.3% Wednesday. CVX stock has been climbing toward a 182.50 buy point, according to MarketSmith. The stock advanced above its 50-day moving average on Oct. 11. It has now shot up 13% in the last two weeks, and has a 52% gain for the year.
In Q2, Chevron earnings per share leapt 240% to $5.82. Revenue spiked 83% to $68.7 billion in the second quarter. CVX’s capital spending in the first half of the year increased 26% to $6.7 billion. That was up from $5.3 billion in 2021. Chevron CFO Pierre Breber told investors in late July he expected CVX to end 2022 below its $15 billion spending budget.
The California-based energy giant produced 1.72 million oil-equivalent barrels per day in the second quarter. That was a decrease of 266,000 barrels per day vs. Q2 2021.
Chevron shares rank 10th in IBD’s Oil&Gas-Integrated industry group. The stock has a 98 Composite Rating and a Relative Strength Rating of 96. Additionally, it has an 80 EPS Rating.
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Source: https://www.investors.com/news/exxon-mobil-stock-will-energy-giants-exxon-chevron-follow-opecs-lead/?src=A00220&yptr=yahoo