Oil and gas giant Exxon (NYSE:XOM) is scheduled to release its Q3 2023 earnings on Friday, October 27, 2023. The company’s preliminary financial results showed a sequential growth in Q3 earnings due to higher oil and gas prices during the quarter. However, its Q3 earnings could continue to decline year-over-year as the prior-year quarter benefited from the spike in commodity prices due to the Russia-Ukraine war.
Exxon – Q3 Expectations
Analysts expect Exxon to post revenue of $93.41 billion in the third quarter of 2023. This compares favorably to the previous quarter’s revenue of $80.46 billion. However, its top line could decline year-over-year, reflecting lower average price realization.
For the bottom line, Wall Street expects Exxon to post earnings of $2.37 per share, much lower than its prior-year quarter’s EPS of $4.45. Lower natural gas realizations and refining margins might adversely impact Exxon’s Q3 earnings. However, structural cost-saving initiatives could continue to cushion XOM’s bottom line.
These cost-saving initiatives will enable the company to drive its cash flows and enhance its shareholders’ value through share buybacks and dividend payments.
Given this backdrop, let’s look at what the Street recommends for XOM stock ahead of Q3 earnings.
Is Exxon Stock Expected to Rise?
Exxon Mobil stock experienced notable gains due to the rebound in oil and gas prices following the relaxation of pandemic-related restrictions and the Russia/Ukraine war. However, the decline in average realized prices of commodities and tough year-over-year comparisons in 2023 are taking a toll on its earnings, restricting the upside momentum in XOM stock so far this year.
While analysts’ sales and earnings estimates for Q3 indicate a sequential improvement, Goldman Sachs analyst Neil Mehta finds the stock’s valuation expensive relative to peers. Mehta reiterated a Hold rating on XOM stock on October 4.
Overall, higher production is expected to support XOM’s upstream portfolio. However, lower price realization could continue to remain a drag. With 11 Buy and seven Hold recommendations, Exxon stock has a Moderate Buy consensus rating. Meanwhile, analysts’ average price target of $128.39 shows an upside potential of 18.45% over the next 12 months.
Insights from Options Trading Activity
While analysts are cautiously optimistic about XOM stock, options traders are pricing in a +/- 2.61% move on earnings, greater than the previous quarter’s earnings-related move of -1.2%.
The anticipated move is determined by computing the at-the-money straddle of the options closest to the expiration after the earnings announcement.
