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ExxonMobil's Upstream to Incur Q2 Loss, Refining to Take a Hit

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Exxon Mobil Corporation (XOM - Free Report) is expected to incur losses in both upstream and downstream businesses in second-quarter 2020 due to continuing headwinds from the coronavirus pandemic.

Upstream operations are expected to take a hit of $2.1-$2.5 billion in the second quarter from first-quarter 2020 due to fall in liquids prices. It will likely bear an additional $400-$600 million brunt of declining gas prices. Energy demand destruction caused by coronavirus-induced lockdowns and global supply glut resulted in a significant commodity price fall in the second quarter.

Profits from the refining business are expected to decline $700-$900 million from the first quarter due to lower margins. Moreover, the company is expected to have a $100-$300 million impact from the North American crude logistics differentials. Notably, the chemicals business is expected to record an operating profit in the range of $400-$600 million compared with first-quarter earnings of $500 million.

The adverse situation not only prompted the global energy majors to reduce spending plans for the year but also forced some companies like BP plc (BP - Free Report) and Royal Dutch Shell plc to commit to asset write-downs. Although ExxonMobil plans to slash 2020 capital spending and cash operating expenses to make up for the massive shortfall in cash flows, it has managed to avoid any write-down so far.

Notably, the Zacks Consensus Estimate for second-quarter loss is pegged at 52 cents per share. Earnings per share of 73 cents were recorded in the year-ago period. The company is scheduled to release second-quarter results on Jul 31, 2020.

Price Performance

The company’s stock has gained 8.9% in the past three months against 2.5% fall of the industry it belongs to. 

Zacks Rank & Stock to Consider

Currently, ExxonMobil has a Zacks Rank #3 (Hold). A better-ranked player in the energy space is Chevron Corporation (CVX - Free Report) , holding a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Over the last 60 days, six analysts have increased Chevron’s earnings estimates for the current year, while none have revised the same downward. Thus, the Zacks Consensus Estimate for the current year has been revised from a loss of 63 cents per share to earnings of 27 cents in the same period.

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