ExxonMobil (XOM +1.70%) reported robust third-quarter results. The global energy giant posted $17.5 billion of adjusted earnings, well ahead of the average analyst estimate of $16.6 billion. While its oil wells benefited from strong crude prices during the quarter, its refineries stole the show.
Here’s a closer look at ExxonMobil‘s third-quarter earnings report and what it means for an investment in the oil stock.
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Drilling down into Exxon’s third-quarter earnings report
Exxon’s adjusted earnings of $17.5 billion were up more than 19% from the second quarter, even though oil prices were lower during the period. Adjusted earnings from its upstream oil and gas production business fell 20% to $7.3 billion, as cooling tensions in the Middle East caused oil prices to drift lower.
The company’s integrated operations helped more than offset that decline as its adjusted downstream earnings rocketed 120% to $9 billion. That was the first time in six years that its refineries earned more than its oil wells. Exxon capitalized on extremely robust refining margins, which were well above the 10-year average during the quarter. Higher margins added $4.7 billion in earnings to its energy products segment in the period. The company ran its U.S. Gulf Coast refineries at full capacity, reaching its second-highest diesel production level on record.
XOM – ExxonMobil
$186.40+$3.11 (+1.70%)
NYSE · As of 2:07 PM ET 10/30/26
What this means for future profitability
Exxon is clearly benefiting from the currently strong market conditions caused by war-related disruptions in the Middle East. It capitalized on those strong market conditions by operating exceptionally well. It also worked hard to increase supply during the quarter.
While current market conditions certainly contributed to Exxon’s strong quarter, the company has positioned itself to prosper. It has invested heavily to expand its advantaged assets (lowest-cost and highest-margin). For example, its investments in expanding its Beaumont refinery have enabled it to increase distillate production by 40% since 2019.
Another aspect of Exxon’s long-term strategy is delivering structural cost savings. Since 2019, it has captured $16.9 billion in savings, expanding its earnings power.
This combination of high-return investments and cost savings is a lasting improvement that will help bolster its earnings long after the currently favorable prices and margins fade. While they won’t completely offset a meaningful near-term decline in oil prices and refining margins, they’ll help cushion the impact. Further, Exxon continues to press on with this strategy. Its 2030 plan aims to deliver $25 billion in earnings growth and $35 billion in cash flow growth at constant pricing and margins compared to 2024. That includes an expected $20 billion in cumulative cost savings compared to 2019.
Robust refining margins don’t tell the whole story
Exxon’s refineries were profit-producing machines during the third quarter. While robust refining margins certainly helped, the company’s strategy of investing in its best assets and stripping out structural costs also boosted its earnings. Those improvements will last long after its refining margins normalize.
Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Source: www.fool.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.
