Exxon (XOM) Signals Strong Profits on High Gas Prices, Analysts Raise Numbers

October 5, 2022 7:23 AM EDT
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In an 8-k filing published yesterday, Exxon Mobil Corp (NYSE: XOM) signaled it will post strong Q3 operating profits on the back of high natural gas prices.

Despite weaker performance in refining and chemicals, Exxon pointed to strong Q3 earnings, which will likely come ahead of the consensus. Exxon could deliver figures close to Q2’s record-setting $17.9 billion profit, the filing showed.

Exxon signaled that natural gas lifted operating results by around $2 billion, which offsets declines of about $1.6 billion in oil profits. Earnings from oil and gas could hit $13 billion, materially higher than the consensus calling for a $10.1 billion in the Q3 operating profit. Overall, operating profits could hit $17.8 billion, again higher than the $14.68 billion, as per Refinitiv.

Bank of America analyst Doug Leggate raised Q3 EPS estimates to reflect a positive trading update.

“While refining is lower sequentially, 3Q22 still looks like XOM’s second best quarter ever, while combined Chemicals/Specialty Products holds up much better than expected, with higher specialty pricing offsetting polymer weakness. Overall 3Q22 sets up XOM for its first meaningful dividend increase in 3 yrs – and potential secondary acceleration in buybacks already 3x to $30bn through end 2023,” Leggate said in a client note.

JPMorgan analyst Ian Mitchell said Exxon will likely report a “solid beat,” judging by the 8-k filing.

“The range of potential outcomes in the guidance is, once again, quite wide ($3.59 to $4.26). However, with history as a guide, we think that XOM typically comes in above the midpoint, including the most recent 2Q22,” Mitchell wrote in a note.

Finally, Goldman Sachs analyst Neil Mehta also raised Q3 estimates following the company's 8-K filing.

“We underestimated the impact of the stronger gas price environment and continued strength in refining margins, driving robust results relative to our estimates… We revise our 3Q2022 EPS estimate from $3.08 to $3.87. We remain constructive on XOM, with a differentiated upstream project queue, unique business transformation driving FCF breakevens lower, and improving returns on capital driving our Buy rating,” Mehta wrote.

The analyst sees an upside potential of over 20% in XOM shares.

By Senad Karaahmetovic

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