ExxonMobil Corporation (XOM), the U.S. energy behemoth, is set to release fourth-quarter 2014 financial results before the opening bell on Monday, Feb 2, 2015.
The company reported strong results in the trailing four quarters, beating the Zacks Consensus in all four with a positive average surprise of 6.89%. In the last reported quarter, ExxonMobil surpassed the Zacks Consensus Estimate by 14 cents on the back of better price realizations. Let’s see how things are shaping up for this announcement.
Factors to Consider in the Past Quarter
Crude oil prices have declined substantially over the past few months, hitting multi-year lows. Starting from $90.74 per barrel on Oct 1, 2014, the West Texas Intermediate (WTI) crude price slid persistently to touch the below $55 per barrel mark in Dec 2014. This is a cause of concern for companies with an upstream exposure as the decline is likely to lower realizations and in turn hamper earnings.
Additionally, production has been persistently declining for this integrated energy giant since 2009, and is likely to heighten the negative impact on the company. Furthermore, extracting oil and gas has become expensive, and is likely to be reflected on the company’s financials. Meanwhile, ExxonMobil’s consistent dividend payments and share repurchases score well with investors but have taken a toll on the company’s cash availability.
However, the company’s diversified operations do offer some relief in the depressed price environment. The company’s downstream operations should benefit from improved margins and a higher demand of refined products.
Earnings Whispers?
Our proven model does not conclusively show that ExxonMobil will beat on earnings in the fourth quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. That is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -0.75%. This is because the Most Accurate estimate is at $1.32 per share while the Zacks Consensus Estimate is pegged higher at $1.33 per share.
Zacks Rank: ExxonMobil has a Zacks Rank #5 (Sell). Not only do we caution investors against Sell-rated (Rank #4 or 5) stocks going into the earnings announcement, a negative ESP also complicates our surprise prediction.
Stocks to Consider
Here are some stocks in the energy industry you may want to consider as these have the right combination of elements to post an earnings beat this season:
Valero Energy Partners LP (VLP) has an Earnings ESP of +3.33% and a Zacks Rank #2. The company is slated to release earnings on Feb 5.
JinkoSolar Holding Co., Ltd. (JKS) has an Earnings ESP of +11.11% and a Zacks Rank #2. The company is expected to release earnings on Mar 2.
Tesoro Corporation (TSO) has an Earnings ESP of +1.40% and a Zacks Rank #2. The company is likely to release earnings on Feb 11.
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