Exxon Mobil Corporation (XOM Quick QuoteXOM - Free Report) has projected a sharp decline in its fourth-quarter earnings due to weak performance across all its business segments, including significant headwinds in refining and chemicals. The oil giant's filing with the SEC indicates that quarterly profits could decrease $1.75 billion sequentially, highlighting a challenging environment for the energy sector.

ExxonMobil's filing highlighted two critical factors influencing its financial performance — upstream asset sales contributing approximately $400 million to its results and overall impairments costing around $600 million. However, the company refrained from providing specific reasons behind these impairments.

A key contributor to the profit slump is ExxonMobil's refining segment, where margins are expected to reduce earnings by $300-$700 million. Timing effects related to inventory valuation and other factors are projected to cause an additional loss of $500-$900 million. Weak demand for gasoline and diesel, combined with new refinery operations in Asia and Africa, has created excess supply, exacerbating margin pressures.

In the United States, refiners maintained high utilization rates, but sluggish demand led to fuel stockpiles. Globally, oil prices declined 6% during the quarter and were down 12% year over year due to demand concerns, adding to ExxonMobil's challenges.

The company's chemicals business also faced challenges, with reduced margins expected to lower earnings by $400 million from the third-quarter level. On the positive side, U.S. natural gas prices climbed about 30% sequentially, partially offsetting the impact of lower oil prices.

According to LSEG estimates, ExxonMobil may report earnings of $1.76 per share for the fourth quarter, implying a significant drop from $2.48 a year ago. RBC Capital Markets analyst Biraj Borkhataria described ExxonMobil's earnings outlook as "well below consensus," highlighting significant headwinds for the refining business.

ExxonMobil's results, scheduled for release on Jan. 31, will serve as a bellwether for the oil industry, offering insights into the broader challenges faced by energy majors. In the third quarter, ExxonMobil posted $8.6 billion in earnings, but the current forecast signals a stark contrast as the company navigates a tough operating environment.

XOM’s Zacks Rank & Key Picks

ExxonMobil currently carries a Zack Rank #3 (Hold).

Investors interested in the energy sector may look at some better-ranked stocks like TechnipFMC plc (FTI Quick QuoteFTI - Free Report) , Sunoco LP (SUN Quick QuoteSUN - Free Report) and Oceaneering International, Inc. (OII Quick QuoteOII - Free Report) . While TechnipFMC and Sunoco presently sport a Zacks Rank #1 (Strong Buy) each, Oceaneering carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

TechnipFMC is a leading manufacturer and supplier of products, services and fully integrated technology solutions for the energy industry. It focuses on the subsea segment in offshore basins worldwide. FTI’s growing backlog ensures strong revenue visibility and supports margin improvements.

Sunoco is a leading wholesale motor fuel distributor in the United States, boasting a vast distribution network spanning 40 states. With long-term contracts servicing more than 10,000 convenience stores, it distributes over 10 fuel brands, ensuring a stable revenue stream. Sunoco is poised to benefit from the strategic acquisitions aimed at diversifying its business portfolio.

Oceaneering International delivers integrated technology solutions across all stages of the offshore oilfield lifecycle. With a geographically diverse asset portfolio and a balanced revenue mix between domestic and international operations, the company effectively mitigates risk. As a leading provider of offshore equipment and technology solutions to the energy sector, OII benefits from strong relationships with top-tier customers, ensuring revenue visibility and business stability.