How Hard Will Falling Oil Prices Hit Exxon Mobil?

Exxon Mobil Corporation   XOM   Energy – Oil, Gas, & Consumable Fuels | Reports February 2, Before Market Opens

Key Takeaways

• The Estimize consensus is expecting EPS of $0.71 and revenue of $52.7 billion. Wall Street Analysts are more bearish, expecting EPS of $0.65 and revenue of $50.6 billion
• Exxon Mobil management has set a $34 billion capex limit for fiscal 2016
• The firm's profitable downstream sector will help mitigate losses from oil related operations
• What are you expecting for XOM? Get your estimate in here!

Energy giant, Exxon Mobil Corporation, is scheduled to report Q4 2015 earnings tomorrow morning before the market opens. Despite posting a positive EPS surprise in 5 of the past 7 quarters, analyst expectations remain bleak as the price of Brent Crude Oil and WTI continue to decline. Chevron released mixed results on Friday, with EPS coming in well below the consensus, but reported revenues beating expectations by $140M.

This quarter, the Estimize community is expecting revenue of $53.9 billion, a stark contrast from Q4 2014 when XOM posted revenue of $87.3 billion. Earnings expectations are less than half of what they were a year ago, with Estimize calling for EPS of $0.70, still above Wall Street's $0.65, but 86 cents lower than the Q4 2014 report.

Compared to other industry players, Exxon has done a remarkable job weathering the recent oil related downturns. The energy giant has leaned heavily on its robust downstream earnings to provide a cushion. As an industry leader and the largest US oil company by market cap, XOM has the financial resources to quell losses from its chemical and refining branches, which have faltered from increased demand for refined fuels.

Since July, crude oil has fallen from $50/barrel to where it currently resides at $30/barrel. Major competitors, such as Chevron, have posted significant EPS and Revenue losses for the first time since 2002. To combat the adverse effects of falling oil prices, companies are poised to cut jobs and reduce capital expenditures. Cost cutting initiatives will allow XOM to issue regular dividend payments and survive in the struggling environment. Last quarter, Exxon cut capital expenditures by 22% from the same quarter a year ago and has now issued a CAPEX ceiling of $34 billion for fiscal 2016.

What do you think about XOM chances tomorrow morning? There is still time to get your estimate in here!

Photo Credit: Mike Mozart