Exxon Mobil's Upstream Earnings Shine Despite Refining, Chemicals Margins Concerns

Mizuho analyst Nitin Kumar reiterated a Buy rating on Exxon Mobil Corp XOM with a price target of $139.

The analyst flags how weak refining and chemicals margins cloud strong upstream earnings.

XOM published its 8-K with 3Q23 earnings considerations last night. Compared to his prior estimates, the implied Upstream earnings range of $5.7 billion - $6.3 billion was the most prominent 'beat' (MSUSAe previous estimate was $5.1 billion vs. consensus at $5.1 billion). 

The company noted ~$0.9 billion - $1.3 billion higher earnings in the Upstream segment due to better Q/Q liquids realizations. 

This was complemented by ~$0.2 billion - $0.6 billion higher earnings driven by better gas pricing and ~ $0.1 billion - $0.3 billion Q/Q improvement from lower maintenance activity. 

Kumar updated his Upstream earnings estimate to $5.9 billion, near the midpoint of the implied range per company disclosure.

Refining (Energy Products) earnings are expected to be weaker compared to his prior model ($3.7 billion) and consensus ($3.2 billion) with the implied range between $2.6 billion - $3.4 billion (midpoint of $3.0 billion). A late-quarter decline in cracks and lower margin capture were likely drivers of the variance compared to Kumar's previous estimates. 

Finally, Kumar notes materially weaker Chemicals earnings (new MSUSAe $0.4 billion vs. prior 1.2 billion, consensus $0.8 billion, and implied range of $0.1 billion - $0.5 billion) driven primarily by lower margins. Specialty Products earnings are likely at ~ $0.6 billion, in line with his (unchanged) estimates and consensus.

Kumar's overall EPS estimate is $2.33 (vs. $2.48 prior) and is in line with consensus at $2.33. The implied range from the 8-K is $2.04 - $2.58. Kumar's CFPS estimate of $3.60 also aligns with the current consensus. 

The analyst projects Q3 revenue of $90.98 billion vs. consensus $87.51 billion and EPS of $2.33 vs. consensus $2.37.

Price Action: XOM shares traded lower by 2.27% at $108.97 on the last check Thursday.