Low Expectations Ahead of Exxon Mobil (XOM) Report

Exxon Mobil Corporation (XOM) reports fourth quarter 2020 earnings in Tuesday’s pre-market, with analysts looking for a profit of $0.02 per share on $48.8 billion in revenue. If met, earnings per share (EPS) will mark a 98% profit decline compared to the same quarter last year. The stock ended a five-month slide in October after posting a 29.0% year-over-year revenue decline and has gained more than 40% since that time.

Rival Chevron Corporation (CVX) missed fourth quarter top- and bottom-line estimates on Friday, posting a 30.5% year-over-year revenue decline. This sub-par performance is weighing on Exxon expectations, raising the odds for a sell-the-news reaction. Things got so bad for the fossil fuel industry in 2020 that Exxon Mobil and Chevron discussed a merger of equals, but crude oil’s advance into 2021 ended those discussions. Even so, Exxon Mobil stock has recouped less than half of the losses posted in the first quarter of 2020, highlighting significant technical damage, compounded by a brutal seven-year downtrend.

The company just announced new steps to reduce emissions in a nod to the Biden administration, enacting “initiatives to commercialize technologies which are key to reducing emissions and meeting societal goals consistent with the Paris Agreement.” It may be too little too late, with alternative energies maturing into a multi-billion dollar powerhouse. The passing of the torch from Baby Boomers to the Millennial generation has also encoded the demise of fossil fuels, making it unlikely that Exxon will be considered a “friend of the Earth” any time soon.

Wall Street consensus on Exxon Mobil stock has improved in the past three months to a current “Hold” rating, based upon 10 “Buy,” 14 “Hold,” and 4 “Sell” recommendations. Price targets currently range from a low of $36.50 to a Street-high $79, while the stock is set to open Monday’s session about $5 below the median $50 target. This humble placement should limit downside if the quarterly report fails to inspire buying interest.

Exxon-Mobil Monthly Chart (2000 – 2021)

A multi-year uptrend topped out at $47.72 in 2000, giving way to a decline that posted a four-year low at $29.75 in 2002. A strong recovery wave broke out to a new high in 2004, ahead of impressive gains into the 2008 top in the low $90s. The stock lost about one-third of its value during the economic collapse and turned higher into the new decade, breaking out in 2013 and posting an all-time high at $104.76 one year later.

Sellers then took control, grinding out a downtrend that broke 2015 support at $66.55 during the pandemic decline. The stock hit an 18-year low in March and bounced strongly, stalling at 200-day exponential moving average (EMA) resistance in the $50s in June. A selloff into October found support just above the first quarter low, yielding an uptick that mounted the moving average earlier this month. However, the stock is still trading below June resistance, marking a level that needs to be crossed to stoke additional buying interest.

The Bottom Line

Exxon Mobil reports fourth quarter earnings on Tuesday, with sentiment deteriorating after last week’s miss by Chevron.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.

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