Saudi Aramco (Saudi Arabian Oil Company), the world’s largest integrated oil and gas company, continued to deliver strong quarterly earnings in Q3. However, the oil giant’s Q3 performance indicated softening of demand of oil, due to economic uncertainty.
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In Q3, Saudi Aramco delivered a net income of $42.4 billion, up 39% year-over-year. However, net income declined by 12.4% on a quarter-over-quarter basis, reflecting lower oil prices (from $113.2/barrel to $101/barrel in Q3).
The company announced that market conditions softened slightly in Q3 as inflationary pressures and economic uncertainty slowed demand growth. Given the uncertainty and high inflation, oil prices could witness some pressure in the short term, indicating that the earnings of oil and gas companies could decline sequentially in Q4.
But before we jump to any conclusion, let’s check what the Street projects for major oil companies like Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX).
Exxon Mobil Stock
Exxon Mobil delivered Q3 adjusted earnings of $4.45 a share, up from $4.14 in Q2 despite lower oil prices. An increase in volume/mix compared to Q2, cost control measures, and higher natural realizations drove its earnings.
However, for Q4, analysts expect Exxon to deliver an EPS of $3.34, down from $4.45 in Q3. This sequential decline reflects lower oil prices.
Is Exxon Mobil a Buy or Sell?
On TipRanks, XOM stock is a Moderate Buy based on eight Buy and four Hold recommendations. Further, analysts’ average price target of $115.25 implies 2.98% upside potential. Meanwhile, Exxon stock has an Outperform Smart Score of “Perfect 10.”
Chevron Stock
Chevron’s Q3 adjusted earnings of $5.56 per share compared unfavorably to Q2 adjusted EPS of $5.82. This quarter-over-quarter decline reflects lower average selling prices for crude oil. In Q3, CVX’s average sales price of crude oil and natural gas liquids in the upstream business was $76/barrel, down from $89/barrel in Q2.
Further, for Q4, analysts expect CVX to post earnings of $4.46 per share, reflecting a considerable decline from the $5.56 reported in Q3.
Is Chevron a Buy, Sell or Hold?
Chevron stock has a Moderate Buy consensus rating on TipRanks based on eight Buy, five Hold, and one Sell recommendations. Further, these analysts’ average price target of $182.93 is roughly in line with its closing price on November 1.
Further, like Exxon, CVX stock sports an Outperform Smart Score of “Perfect 10” on TipRanks.
Bottom Line
Oil and gas companies are expected to benefit from increased production, cost control, and higher oil prices (compared to the prior year). However, the earnings of these companies could decline quarter-over-quarter, reflecting a sequential decline in oil prices amid uncertainty.
