ExxonMobil tipped to beat EPS estimates for Q2 despite oil price drag, analysts say

UBS analysts have reiterated a 'Buy' rating and $130 price target for ExxonMobil, forecasting Q2 adjusted EPS of $1.66, which exceeds the $1.52 consensus. Despite anticipated headwinds from softer oil prices, the firm projects strong operational performance driven by significantly improved refining margins and positive mark-to-market impacts, particularly boosting the Energy Products segment. While Upstream earnings are expected to decline quarter-over-quarter due to commodity price weakness, they are still forecast to surpass Street estimates, underscoring the company's diversified earnings strength.

Analysis

UBS analysts have reiterated a 'Buy' rating for ExxonMobil, forecasting second-quarter adjusted earnings per share of $1.66, which surpasses the consensus estimate of $1.52. This outlook is maintained despite a significant commodity price headwind, with an approximately $8 per barrel drop in Brent crude expected to reduce upstream earnings by $1.3 billion. The company's integrated model is projected to demonstrate its value, as the upstream weakness is more than offset by exceptional strength in the Energy Products segment. This downstream division is anticipated to nearly double its net income quarter-over-quarter to $1.65 billion, propelled by a $3.20 per barrel increase in refining margins and a positive mark-to-market timing impact of around $300 million. While the core Upstream segment's net income is expected to decline to $5.16 billion, it is still projected to exceed the Street's estimate of $4.71 billion. A minor point of weakness is the Chemical Products segment, where forecasted net income of $404 million, though an improvement, falls short of the $477 million consensus.

Key Decisions for Investors

• Investors should consider the potential for a positive earnings surprise on August 1, as the forecasted strength in downstream refining margins appears poised to outweigh the widely anticipated drag from lower oil and gas prices.
• Pay close attention to the performance of the Energy Products segment, as its ability to deliver a near-doubling of net income to $1.65 billion is the central pillar of the bull case for the upcoming report.
• While the overall outlook is positive, monitor the Chemical Products segment's results, as its projected miss against consensus estimates could be a source of relative underperformance and temper the market's reaction.
• Given the reaffirmed $130 price target, which implies a 17% upside, long-term investors may view the current price level as an attractive entry point ahead of what is expected to be a strong operational update.