Energy giant Exxon (NYSE:XOM) issued preliminary estimates for the third quarter, which indicate a sequential growth in Q3 2023 earnings due to higher oil and gas prices. However, Q3 earnings would still be down compared to the prior-year quarter when energy prices spiked due to the Russia-Ukraine war.
Exxon’s Q3 Earnings Update
As per the update, higher liquids prices enhanced Q3 2023 upstream earnings by a range of $0.9 million to $1.3 billion compared to the second quarter. The rise in gas prices increased Q3 upstream earnings by $200 million to $600 million.
Additionally, demand for refining products increased the profits of the Energy Products business by a range of $0.9 million to $1.1 billion. However, the company expects lower profitability in its Chemical Products business, with lower margins having an unfavorable impact of $400 million to $600 million.
Crude oil prices have risen recently due to the extended supply cuts by OPEC+ nations, stable demand despite macro pressures, and hopes of higher demand driven by China’s measures to boost its economy.
Citing J.P.Morgan analyst John Royall, Bloomberg noted that based on the update, Exxon’s Q3 2023 EPS is expected to be about $2.33. This estimate indicates a sequential increase in Exxon’s EPS following three consecutive quarters of decline.
Is Exxon a Buy, Sell, or Hold?
Earlier this week, Morgan Stanley analyst Devin McDermott increased his price target for Exxon stock to $134 from $131 and reiterated a Buy rating. Prior to this, McDermott increased his price target for Exxon stock to $131 from $124 on September 22, after the company’s Product Solutions Spotlight event and tour of its Baytown refining and chemicals complex.
Following the event that showcased the prospects and attractive growth of the company’s “peer-leading” downstream and chemicals businesses, McDermott raised his estimates and projects upside to consensus expectations.
Wall Street has a Moderate Buy consensus rating on XOM stock based on nine Buys and eight Holds. The average price target of $125.80 implies about 13% upside potential.
