Summary
- Exxon's stock came under pressure after the release of its latest SEC report.
- Exxon's overall income may decline in 3Q19.
- Downstream and Chemical segments may disappoint again.
I strongly believe that Exxon Mobil’s (XOM) stock price may come under more pressure, once its 3Q19 earnings results are announced on October 31, 2019. Exxon Mobil’s stock price had come under pressure on Wednesday, October 3, after the company released its latest Securities and Exchange Commission (SEC) filing report a day earlier. Before I analyse this report, I would like to highlight a few takeaways from my previous article on Exxon Mobil. On August 7, 2019, I had stated that Exxon Mobil’s stock will face downward pressure in the near future , as its actual performance was not in sync with its aggressive growth strategy.
Although Exxon Mobil plans to achieve a double-digit growth in all its three segments, only upstream segment reported decent numbers in 2Q19, while the downstream and chemical segment earnings declined sharply. Investors must note that Exxon’s stock has declined by more than 4.5% since the publication of my earlier article. This indicates that the market is expecting a strong comeback from Exxon Mobil when it reports its 3Q19 earnings results. But, when I look at the latest SEC report, things don’t look that great for the energy major.
Exxon’s 3Q19 earnings results may disappoint the markets
As per the latest SEC filing report, Exxon’s cumulative profits for 3Q19 would be 50% lower YoY at around $3.1 billion. This is not a good development at all. The SEC report further states that Exxon’s upstream profits will witness a 45% YoY decline from the previous year’s $4.23 billion. Investors must note that Exxon’s upstream earnings had increased from $3 billion in 2Q18 to $3.26 billion in 2Q19, and this was when its upstream volumes stood at 3.9 million barrels per day with a YoY growth of 8%.
The latest SEC report reveals that Exxon’s 3Q19 upstream volumes (supported by Permian basin and Natural gas volumes) may remain largely unchanged when compared to the second quarter, but the results will be impacted by lower crude oil prices and its volatility. In my earlier articles on Exxon, I have repeatedly stressed that Exxon’s performance is closely related to oil prices when compared to other energy majors like BP (NYSE:BP) and Shell (NYSE:RDS.A) (NYSE:RDS.B) which have a more diversified energy portfolio. So, I will not be surprised if Exxon Mobil reports another weak quarter because of low oil prices.
