Exxon Mobil Corporation (XOM Quick QuoteXOM - Free Report) is set to report third-quarter 2024 results on Friday before the opening bell.

The Zacks Consensus Estimate for third-quarter earnings is pegged at $1.95 per share, implying a decline of 14.1% from the year-ago reported number. The estimate was revised downward by three analysts in the past 30 days against two upward movements. The Zacks Consensus Estimate for third-quarter revenues is currently pegged at $94.2 billion, suggesting a 3.8% uptick from the year-ago actuals.

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XOM beat the consensus estimate for earnings in two of the trailing four quarters and missed the same twice, with the average negative surprise being 1.84%. This is depicted in the graph below:  

Q3 Earnings Whispers for XOM

Our proven model doesn’t predict an earnings beat for XOM this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. That is not the case here.

The leading integrated energy player has an Earnings ESP of -2.52%. XOM currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

ExxonMobil Factors to Note

ExxonMobil reported in a Form 8-K that weaker oil prices could reduce its third-quarter earnings from upstream operations by $0.6 billion to $1 billion sequentially. This projection seems reasonable, given that crude oil prices were stronger in the third quarter of 2023. According to the U.S. Energy Information Administration (“EIA”), the monthly average WTI spot prices for July, August and September 2024 were $81.80, $76.68, and $70.24 per barrel, respectively, compared with $76.07, $81.39, and $89.43 per barrel, in the year-ago months.

XOM also expects a lower industry refining margin to hurt its earnings from the Energy Products business segment in the September quarter by $0.6 billion to $1 billion compared to the previous quarter.

XOM’s Stock Price Performance & Valuation

XOM's stock has soared 14.3% over the past year compared with the industry’s rise of 6.8%. BP plc (BP Quick QuoteBP - Free Report) , another integrated energy major, has declined 15.5% over the same time frame, while Chevron Corporation (CVX Quick QuoteCVX - Free Report) , in the same space, has gained 7.3%.

One-Year XOM, BP, CVX Stock Price Chart

Image Source: Zacks Investment Research

With the price increase, XOM is appearing relatively overvalued. The company's current trailing 12-month enterprise value/earnings before interest, tax, depreciation and amortization (EV/EBITDA) ratio is 6.30, which is trading at a premium compared to the industry average of 3.86.

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Investment Thesis of XOM

The acquisition of Pioneer Natural Resources boosts ExxonMobil's production capabilities in the Permian Basin, one of the most profitable regions in the United States due to its exceptionally low production costs. The integrated energy major also has a strong pipeline of projects encompassing offshore Guyana assets, also known for low-cost structures.

XOM is well known for better utilization of invested funds and has a strong balance sheet. Hence, the energy major can rely on its solid financials to sail through an unfavorable business environment. Also, investing in alternative energy, such as carbon capture and lithium battery technology, offers potential growth opportunities for ExxonMobil. However, these projects require substantial capital and carry uncertain returns in the short term. Moreover, the company’s business is highly exposed to volatile oil and natural gas prices.

Last Word

Considering the backdrop, it may be prudent for investors to hold the stock now and potentially benefit from ExxonMobil's long-term growth prospects.