Analysts have lowered their fourth-quarter earnings estimates for Exxon Mobil following the oil giant’s warning of potential impacts from reduced prices and margins. This signals a potentially challenging quarter for oil producers as they prepare to release their results.
Exxon Mobil’s stock price dipped 1.4% to $107.17 following the announcement, reflecting investor concern. This earnings warning from a leading industry player suggests a broader trend of lower profitability in the oil sector for the fourth quarter. Major oil producers will begin publishing their official results later this month.
Mizuho Americas reduced its earnings per share (EPS) estimate for Exxon Mobil by 13% to $1.55. Similarly, Tudor Pickering Holt & Co. cut its projection by 15% to $1.49 per share, both citing Exxon’s pre-announcement as the basis for their revisions. Exxon Mobil indicated on Tuesday that its fourth-quarter earnings would likely be approximately $1.75 billion lower than the previous quarter’s results. The official earnings report is scheduled for release on January 31st.
According to Biraj Borkhataria, an oil analyst at RBC Capital Markets, Exxon Mobil’s outlook aligns with downward revisions observed for independent refiners and other major oil companies with significant refining operations. This trend suggests a sector-wide challenge related to refining margins and reduced demand. Borkhataria further noted that the preliminary earnings snapshot could negatively impact Exxon’s stock price in the short term.
Exxon Mobil outlined that reduced margins on sales are expected to decrease profits by $300 million to $700 million in oil refining and an additional $400 million in chemicals compared to the third quarter. These losses are partially offset by impairments across various business segments costing roughly $600 million. However, gains from asset sales, increased natural gas prices, and a more favorable tax outlook are expected to mitigate some of the negative impact.
The decline in refining profits for Exxon Mobil and other oil companies stems from a normalization of demand following a post-pandemic surge. Global demand for gasoline and diesel has fallen short of expectations. The increased global refining capacity from newly opened plants has also contributed to the pressure on refining margins.
Exxon Mobil holds a prominent position as one of the world’s largest refiners, boasting a global refining capacity of 4.5 million barrels of oil per day. The company is also a major player in the manufacturing of commodity and specialty chemicals.
Before the warning, financial data compiled by LSEG indicated an expected profit of $1.76 per share for Exxon Mobil in the fourth quarter. This contrasts with the $2.48 per share earned in the same period a year earlier.
While Exxon Mobil’s shares saw a 7.6% increase in 2024, this performance lagged behind the S&P 500’s substantial 23.3% gain. This underscores the challenges faced by the oil sector amidst fluctuating demand and global economic uncertainties.
In conclusion, the lowered earnings estimates for Exxon Mobil highlight the challenges currently facing the oil refining sector. Reduced demand and increased global refining capacity have compressed margins, leading to lower profit projections. While mitigating factors such as asset sales and higher natural gas prices offer some relief, the overall outlook suggests a potentially difficult quarter for Exxon Mobil and other major oil producers. The company’s official fourth-quarter earnings release on January 31st will provide a more comprehensive understanding of its financial performance and future prospects.
