Stock Analysis & Ideas

Higher Oil Prices Could Benefit ExxonMobil in Q2, Says Top Analyst

Story Highlights

ExxonMobil is expected to announce its Q2 results on July 29. Top-rated analyst Stephen Richardson, with a 53% success rate, expects XOM to deliver upbeat results in the second quarter.

Top-rated analyst Stephen Richardson from Evercore expects ExxonMobil (NYSE: XOM) to benefit from the raised oil and gas prices in the second quarter and is bullish about the stock with a Buy rating.

XOM shares have soared 44.1% this year as commodity prices, specifically oil, have remained strong. The oil and gas behemoth is expected to announce its Q2 results on July 29.

ExxonMobil is involved in the exploration and production of crude oil and natural gas. The company also manufactures, trades, transports, and sells crude oil, natural gas, petrochemicals, and petroleum products.

ExxonMobil’s Q2 Outlook

Wall Street analysts have projected ExxonMobil’s earnings to come in at $3.84 per share in Q2. Analyst Richardson raised his earnings per share (EPS) estimate for XOM to $3.97 versus $3.26 per share earlier.

Analysts have projected ExxonMobil to generate revenues of $111.7 billion in Q2.

The company’s business segments include Upstream, Downstream, and Chemicals. Let us look at analyst Richardson’s outlook for the upstream business.

ExxonMobil’s Upstream Business

ExxonMobil’s Upstream business includes selectively developing oil and natural gas resources and pursuing productivity and efficiency gains.

The company had stated on its Q1 earnings call that it expected higher volumes in Q2 for this business segment, driven by higher oil production at its Permian and Guyana basins. Richardson has projected the Upstream business segment’s revenues to go up by $2.8 billion in Q2 versus Q1 as a result of higher oil and gas prices and rising volumes.

Outlook for ExxonMobil’s Product Solutions Business

The company’s product solutions business consists of energy, chemical, and specialty products. ExxonMobil’s management stated on its Q1 earnings call that it anticipates higher planned turnaround and maintenance costs, albeit a tight supply and demand balance, are likely to persist in Q2 when it comes to the refining business.

Richardson is optimistic about this business and expects earnings to go up in the range of $5 billion to $5.2 billion, “driven by surging refining margins ($4.5 Bn) and mark-to-market derivatives ($0.8 Bn).”

Richardson’s Take

Richardson estimates that ExxonMobil’s operating cash flows could be likely be $21.4 billion, while stock buybacks in Q2 could be in the range of $4 billion.

The analyst believes that XOM could deliver positive Q2 results driven by “higher-than-expected gas price realizations and downstream margins.”

Richardson’s price target of $120 implies an upside potential of 31.1% at current levels.

Other Wall Street analysts are bullish about the stock, with a Strong Buy consensus rating based on 12 Buys and four Holds. The average ExxonMobil price target of $107.61 implies an upside potential of 17.5% at current levels.

Bottom Line

It appears that ExxonMobil is likely to perform exceedingly well in Q2 as a result of higher oil and gas prices.

XOM has a dividend yield of 3.9%, which exceeds the sector average of 3.09%. Recently, the company declared a cash dividend of $0.88 per share payable on September 9 to shareholders of record as of August 12, 2022.

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