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Why ExxonMobil’s 4Q16 Earnings Beat Estimates

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ExxonMobil’s 4Q16 performance

ExxonMobil (XOM) posted its 4Q16 results on January 31, 2017. Before we proceed with an earnings review, let’s quickly examine ExxonMobil’s 4Q16 performance compared to analysts’ estimates.

In 4Q16, ExxonMobil’s revenues missed Wall Street analysts’ estimates by 2%. The company’s 4Q16 reported EPS (earnings per share) stood at $0.41. Adjusting for an impairment charge, ExxonMobil’s adjusted EPS stood at $0.90 in 4Q16, which was ~28% higher than the estimated EPS of $0.70. ExxonMobil’s 4Q16 adjusted EPS was also 34% higher than its EPS in 4Q15.

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ExxonMobil’s 4Q16 earnings

ExxonMobil reported a decline in earnings from $2.8 billion in 4Q15 to $1.7 billion in 4Q16. The fall was due to an impairment charge of $2 billion related to dry gas operations in the Rocky Mountains region.

Excluding the impairment, ExxonMobil’s adjusted net earnings, as well as upstream earnings, rose YoY (year-over-year) during the quarter. Crude oil realizations rose YoY during the quarter. WTI (West Texas Intermediate) average prices rose from $42 per barrel in 4Q15 to $49 per barrel in 4Q16. ExxonMobil’s downstream segment saw its earnings fall from $1,351 million in 4Q15 to $1,241 million in 4Q16 due to lower margins. We’ll take a detailed look at ExxonMobil’s segment-wise performance in the next part.

Chevron’s (CVX) 4Q16 adjusted EPS was 19% lower than its 4Q15 adjusted EPS. BP (BP) is expected to see its earnings more than double in 4Q16—compared to 4Q15. Royal Dutch Shell (RDS.A) and Total (TOT) are expected to post 19% and 5% higher EPS YoY in 4Q16.

Performance in 2016

In 2016, ExxonMobil posted earnings of $7.8 billion—lower than $16.2 billion in 2015. During 2016, the company witnessed declines in upstream as well as downstream earnings due to lower crude oil realizations and weaker refining margins. ExxonMobil’s chemical segment saw improved earnings due to better margins in 2016 compared to 2015. ExxonMobil’s 2016 adjusted EPS stood at $2.4—above its estimated EPS of $2.2.

If you’re looking for exposure to integrated energy sector stocks, you might consider the iShares Global Energy ETF (IXC). IXC has ~55% exposure to the industry. Next, we’ll look at ExxonMobil’s segments in 4Q16.

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