ExxonMobil Holdings Corporation XOM is set to report third-quarter 2026 results on Oct. 30, before the opening bell.
The Zacks Consensus Estimate for third-quarter earnings is pegged at $3.90 per share, implying a surge of 107.5% from the year-ago reported number. It has witnessed one downward estimate revision and two upward movements in the past seven days. The Zacks Consensus Estimate for third-quarter revenues is currently pegged at $102.98 billion, suggesting a roughly 21% rise from the year-ago actuals.
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XOM beat the consensus estimate for earnings in three of the trailing four quarters and missed once, with the average surprise being 2.43%. This is depicted in the graph below:
Q3 Earnings Whispers for XOM
Our proven model predicts an earnings beat for XOM this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. That is the case here.
The leading integrated energy player has an Earnings ESP of +6.03%. XOM currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
XOM’s Factors to Note
In its latest 8-K SEC filings, XOM stated that it is likely to see a sequential decline in the September quarter upstream earnings by $1.3 billion due to a decrease in liquid prices. However, the picture is different if we consider the commodity prices on a year-over-year basis.
To understand how oil prices behaved in the September quarter, let’s analyze the commodity prices from the data provided by the U.S. Energy Information Administration (“EIA”). The average Cushing, OK, WTI spot prices for July, August and September of this year were $80.46 per barrel, $83.90 per barrel and $97.31 per barrel, respectively, per EIA data. Commodity prices were $68.39 per barrel, $64.86 per barrel and $63.96 per barrel in the prior-year respective quarters, according to the EIA.
A constructive oil-price backdrop, not sequentially but on a year-over-year basis, driven by the Iran war, aided the company’s exploration and production businesses in the September quarter of this year, similar to BP plc BP and Chevron Corporation CVX.
XOM added that stronger margins in its Energy Products segment likely provided a $4.5 billion sequential benefit, possibly due to strong refinery utilization in the United States.
XOM’s Price Performance & Valuation
XOM’s stock has jumped 59.2% over the past year, outperforming the industry’s 55.7% surge. BP has gained 45.3% over the same time frame, while Chevron has rallied 49.4%.
One-Year Price Chart
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While XOM’s stock price has outperformed the industry, the company appears relatively overvalued. The company’s current trailing 12-month enterprise value/earnings before interest, tax, depreciation and amortization (EV/EBITDA) is 10.26x, reflecting that it is trading at a premium compared with the industry average of 6.68x. Both BP and CVX are valued lower at 3.21x and 8.68x, respectively.
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Investment Thesis of XOM
West Texas Intermediate (“WTI”) crude is trading at more than the $100-per-barrel mark. The high prices are being driven by intensifying conflicts in the Middle East. The U.S. Energy Information Administration in its latest short-term energy outlook projected WTI at $88.21 per barrel this year, higher than $65.40 last year. A highly favorable oil pricing environment is likely to continue supporting ExxonMobil’s exploration and production activities, similar to BP and Chevron.
Importantly, upstream operations generate the majority of earnings for XOM. The company has a massive footprint in the Permian, the most prolific oil and gas play in the United States and offshore Guyana. In the Permian, the integrated giant has been employing new drilling techniques and artificial intelligence to boost and optimize production volumes at lower cost structures.
In Guyana, XOM has made several oil and gas discoveries, further highlighting its solid production outlook. Robust production from both assets has been aiding its top and bottom lines. In both resources, the breakeven costs are low.
Last Word
Given the overall favorable business outlook, investors may want to bet on the integrated energy giant ahead of earnings, despite its overvaluation.
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This article originally published on Zacks Investment Research (zacks.com).
Source: finance.yahoo.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.
