Exxon, Chevron Q3 preview: Profit likely to see double-digit drop as oil prices fall

Oil majors Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) are expected to post a sharp decline in Q3 profit when they announce earnings on Friday, before the bell, with revenue also seen falling year-over-year amid lower crude prices.

XOM has outperformed its peers so far this year and has risen despite a pullback in oil prices. CVX on the other hand, trades at discounts relative to the sector.

On average, analysts expect Exxon Mobil (XOM) to report EPS of $1.90 (-16.3% Y/Y), and the consensus revenue estimate is $88.36B (-2.6% Y/Y).

For Chevron, the consensus EPS estimate is $2.43 (-20.3% Y/Y) on revenue of $49.04B (-9.3% Y/Y).

CVX has recently divested assets in Canada, and RBC Capital Markets suspects there will be questions on the call as to why the company decided to exit this long-term resource opportunity ahead of the arbitration outcome.

For XOM, with the annual corporate plan update coming in December, RBC would not expect any shifts in “guidance or strategy alongside 3Q reporting, with focus on the call likely to be around post-close integration for PXD.”

Seeking Alpha’s Quant Rating system takes a cautious stance on the stocks, assigning a Hold rating to both, while Wall Street analysts remain optimistic with Buy ratings.

Over the last 2 years, XOM has beaten EPS estimates 63% of the time and surpassed revenue estimates 50% of the time. CVX has beaten EPS and revenue estimates 50% of the time.

However, both energy firms have seen downward EPS revisions over the last 3 months.

White Star Research has recently downgraded both Chevron (CVX) and ExxonMobil (XOM) to underweight, with new price targets of $140 and $120, respectively.

In other news, British oil major BP (BP) reported its weakest quarterly earnings in nearly four years. Shell (SHEL) posted a small year-on-year drop as a sharp decline in crude prices and lower refining margins were partially offset by higher gas sales.