Earnings Watch: Big Oil Reports Friday
Estimize | Apr 28, 2016 01:48PM ET
After a tumultuous 2015 for the energy sector, prices are starting to stabilize in the new year. After the Fed’s announcement this week to leave rates unchanged, oil surged to 2016 highs. Crude Brent reached a year-to-date high of $47.18 while WTI pushed over $45 for the second time this year. Oil has rebounded since slumping to its lowest levels since 2003. A large portion of oil’s recent gains is fueled by weakness in the U.S. dollar. As oil continues to pick up steam, producers such as Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) should start to see earnings bounce back. While the recent turnaround won’t impact Friday’s earnings, it will play a large role on the outlook for the remainder of the year.
Exxon Mobil Corporation (NYSE:XOM) Energy - Oil, Gas & Consumable Fuels | Reports April 29, Before Market Opens.
The Estimize consensus is calling for earnings per share of $0.34 on $49.76 billion in revenue, 3 cents higher than Wall Street on the bottom and $1.6 billion on the top. Since its last report per share estimates have been cut by 49% with sales revised down 14%. Compared to a year earlier this reflects a 67% decline in profitability while revenue could plunge as much as 26%. Given Exxon’s recent track record it’s almost shocking that the stock is unscathed leading up and through earnings season.
What to Watch: Last quarter featured a number of declines in key financial metrics. Both earnings per share and revenue hit a new low for the last 2 years. The company’s three main reporting segments were largely mixed with upstream earnings underperforming and downstream and chemical earnings up from the year prior. Meanwhile, Exxon continues to cut capital spending and expenditures as a measure to tackle the weak commodities environment. Unfortunately, fourth quarter lows are only expected to get worse this quarter. Upstream and downstream earnings are forecasted to decline on a sequential and year over year basis while chemical earnings are expected to increase. Just days ahead of earnings, S&P downgraded Exxon’s AAA ratings, leaving just two non financial companies with the highly coveted rating. From an investor’s perspective, all the hoopla has had a minimal impact on the stock. Share prices have been flat from a year earlier and up 17% in the past 3 months.
Chevron Corporation (NYSE:CVX) Energy - Oil, Gas & Consumable Fuels | Reports April 29, Before Market Opens.
The Estimize community is looking for a 10 cent loss on $23.87 billion in revenue, 8 cents higher that Wall Street on EPS and nearly $320 in revenue. Estimates have been frantically falling in the past 3 months as per share estimates have been cut over 150%. Compared to the same period last year, earnings per share are predicted to fall 104% on a 31% decline in sales. Shockingly, like Exxon, Chevron shares have been unharmed from weak earnings.
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What to Watch: For Chevron, oil prices have led to a steep declines in both its upstream and downstream services. Last quarter featured a $1.3 billion decline in upstream earnings, $500 million decline in downstream earnings and $240 million loss in all its other business segments. Meanwhile, Chevron capped off 2015 with a shrinking cash position and total debt that increased $10.8 billion over the year. Consequently, Chevron has begun implementing cost saving initiatives to sustain operations until the oil turnaround is validated. This includes cutting its relatively high level of capital spending and workforce reductions. That said, investors have been rewarded so far this year, with shares up nearly 25% in the past 3 months
Given what appears to be a turnaround in oil and strong earnings from British Petroleum earlier this week, Exxon and Chevron can only hope earnings will rebound during the second half of the year.
How do you think they'll do on Friday?
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