Check-up on Energy: XOM and CVX Earnings Preview

The drop in crude oil prices in January to 12 year lows forced some giants in the oil patch to cut staff and capital spending, setting off alarms that earnings could be at risk. Those firms will come clean this week when they report Q1 earnings. We’ll look at two of the biggest, Exxon Mobile Corporation XOM and Chevron Corporation CVX. Both deliver results ahead of the opening bell on Friday.

Exxon’s Extra Hit
Wall Street is expecting XOM to post its steepest profit and revenue declines since the oil bust began in 2014. But can the chemicals business help offset some of the drop in oil?

Analysts reporting to Thomson Reuters are looking for, on average, earnings per share to plummet 74% to $0.31, from $1.17 in the year-ago period. Revenues are projected to tumble too, by 33% to $45.3 billion from $67.6 billion last year.

Short-term options traders have priced in a potential 2% share price move in either direction around the earnings release, according to the Market Maker Move indicator on the thinkorswim® platform by TD Ameritrade.

Going into earnings, options activity has been seen in at-the-money calls on the 88 strike and buyers at the 84- and 85-strike puts. The implied volatility is in line with what we’ve seen generally this earnings season at the 20th percentile. (Please remember past performance is no guarantee of future results.)

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation, to sell the underlying security at a predetermined price over a set period of time.

As a result, Thomson Reuters analysts are forecasting a $0.15 a share loss for the quarter, compared to a profit of $1.07 a share a year ago, which beat Wall Street’s expectations by $0.28. Not surprisingly, revenues are projected to dive too, down 38% to $21.4 billion.

Short-term options traders have priced in a potential 2% share price move in either direction around the earnings release, according to the Market Maker Move indicator.

Going into earnings, there’s been a lot of activity at the 100-strike puts and the 110-strike calls. The implied volatility is at the 25th percentile.

Thomson Reuters analysts are pegging a per-share profit of $0.46, double last year’s profit of $0.23 a share. Revenues are expected to advance by 13% to $35.8 billion.

Short-term options traders have priced in a potential 3% share price move in either direction around the earnings release, according to the Market Maker Move indicator.

Going into earnings, most options trading activity has been around the money at 12.5-, 13- and 13.5-strike puts and 13.5- and 14-strike calls. The implied volatility is at the 32nd percentile.

Analysts polled by Thomson Reuters, on average, are projecting a profit of $0.64 a share, below the year-ago quarter of $0.71. Top-line sales are expected to edge up to $4.24 billion from $4.0 billion a year ago.

Short-term options traders have priced in a potential 2.5% share price move in either direction around the earnings release, according to the Market Maker Move indicator.

BMY is not a stock heavy with options trading, and going into earnings, we’ve seen some activity in the at-the-money 71-strike calls and the 76-strike puts. The implied volatility is relatively low as well, at the 16th percentile.

Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2016 TD Ameritrade IP Company, Inc. All rights reserved. Used with permission.