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Exxon Earnings Beat Street Estimates

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By: Darren Gold
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Quarterly Performance Overview (3QFY13)

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Beating Expectations

Exxon Mobil Corporation (XOM) more than made up for the disappointing results in the previous quarter when it beat estimates and announced $112.4 billion in revenues for 3QFY13. This was a significant turnaround for the company which had recently announced its worst ever results since 2010.

Earnings from its Upstream segment noticeably improved on both a year-over-year (YoY) and quarter-over-quarter (QoQ) basis. The segment performed better because global oil pricing benchmarks like the price of Brent crude oil increased during 3QFY12. Exxon is also increasing its exposure in liquid production to capitalize on high crude oil prices and upstream volumes also increased 1.5% YoY.

The decline in refining and marketing margins is a cause for concern and hit earnings but the possible impact was partially offset by an increase in volumes in 3QFY13. The Dartmouth refinery, which is being converted into a marine terminal, remained functional over the quarter, which also contributed to the higher refining volumes.

Exxon’s Chemicals business was the highest growing segment in the previous year. Margins as well as volumes have improved compared to the previous quarter and the previous year’s same quarter.

Management also stated that in its earnings call that capex for FY13 was in accordance with guidance. The company’s cash balance over the quarter rose by $700 million to $5.7 billion. This indicates Exxon’s ability to keep on paying dividends and also continue its share buyback program. Dividend paid out by Exxon this quarter was $2.8 billion and the company also bought back 34 million shares worth $3 billion.

Effect on Stock Price

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*Two days after the earnings release

Conclusion

Exxon’s 3QFY13 earnings are impressive considering the announcements by its peers. Exxon’s earnings declined just 18%, while BP and Shell’s earnings declined 32% and 26% respectively.

The only worrying sign has been its lower refinery margins, which are a problem for major players across the industry.

In the earnings call, company management also talked about the new acreage that Exxon acquired in Canada, Gabon and Argentina over the quarter and this international exposure will further cement future growth through geographical diversification.

As stated in our previous articles http://www.bidnessetc.com/energy/ Exxon has the ability to sustain adverse market conditions and is better positioned to give solid shareholder returns compared to its competitors and this makes it a buy.

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