Exxon Stock Dips 3% on Q1 Earnings Miss, Production Fall

Key Takeaway

• Exxon Mobil's stock dropped over 3% after Q1 earnings of $8.22 billion and production missed forecasts, despite revenue beating expectations at $83.08 billion.
• Increased costs and geopolitical tensions impacted operations, with a notable rise in overall deductions to $70.71 billion.
• Despite a 1.2% decrease in upstream volumes, Exxon's year-to-date stock performance remains strong at a 21.4% increase, outpacing the Energy Select Sector SPDR ETF and the S&P 500.

Earnings and Production Miss Expectations

Exxon Mobil Corp. experienced a notable decline in its stock value, dropping more than 3% following the announcement of first-quarter results that did not meet analysts' forecasts for profit and production. The company reported a net income of $8.22 billion, or $2.06 a share, a decrease from $11.43 billion, or $2.79 a share, in the same period the previous year. This decline was attributed to reduced industry refining margins and a significant 32% drop in natural-gas realizations. Despite these challenges, Exxon's revenue of $83.08 billion surpassed the FactSet consensus of $79.69 billion. Analysts like Justin Jenkins from Raymond James acknowledged Exxon's continued execution and improved unit-level profitability, highlighting the strategic progress in areas such as the Guyana fields and West Texas Permian holdings.

Costs Rise Amid Geopolitical Tensions

The company faced increased overall costs and other deductions, rising 1.4% to $70.71 billion. This was partly due to a 3.5% increase in crude oil and product purchases and a 13.4% rise in depreciation and depletion. Exxon's CFO, Kathryn Mikells, commented on the geopolitical events in the Middle East and Russia, describing them as "pretty troubling" and acknowledging their potential impact on the business. Despite these challenges, Exxon's operations have remained uninterrupted, with a focus on ensuring the safety of its personnel.

Production and Market Performance

Exxon reported a 1.2% decrease in upstream volumes, with production falling short of the FactSet consensus. However, net production of crude oil, natural-gas liquids, bitumen, and synthetic oil saw a 2.5% increase. The decline in net natural-gas production available for sale was 8.2%. Year to date, Exxon's stock has seen a 21.4% increase, outperforming the Energy Select Sector SPDR exchange-traded fund and the S&P 500. This performance reflects the company's resilience and strategic focus, despite the earnings miss and the challenges posed by geopolitical tensions and market dynamics.

Street Views

• Justin Jenkins, Raymond James (Neutral on Exxon Mobil):

  "While shy of sell-side estimates, Exxon’s [first-quarter] results show continued execution and improved unit-level profitability versus prior cycles."

• Alastair Syme, Citi (Cautiously Optimistic on Exxon Mobil):

  "While the results were about 7% below market expectations, Exxon’s financial leverage remains towards the lower end of the peer range, giving a resilience to current plans around shareholder distributions as well as supporting future investment/growth ambitions."