Oil & Refining Gains May Fuel ExxonMobil's Q3: Time to Buy the Stock?
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Exxon Mobil Corporation XOM recently announced its expectations for third-quarter 2025 earnings. The large integrated energy company expects its earnings to increase sequentially by up to $300 million, solely due to the change in oil prices. It also expects a favorable industry refining margin to aid its bottom line.Amid the developments, should the investors bet on the stock right away? To draw investment conclusions, let’s analyze ExxonMobil’s business fundamentals.How Will Oil & Refining Margins Impact XOM’s Q3 Earnings?In its latest 8-K SEC filings, XOM stated that it is likely to witness a sequential increase in its September quarter earnings by $200 million, thanks to the change in natural gas prices. Notably, the energy giant revealed that the oil price change might affect its third-quarter 2025 bottom line sequentially. This impact, as projected by XOM, is likely to be between a loss of $100 million and earnings of $300 million. Similarly, the natural gas price change is expected to hurt its bottom line sequentially. XOM anticipated the impact to be in the range of a $200 million loss to a $200 million profit.To have an idea of how oil and natural gas prices behave in the September quarter, let's analyze the commodity prices from the data provided by the U.S. Energy Information Administration (“EIA”). The average Cushing, OK WTI spot prices for July, August and September of this year were $68.39 per barrel, $64.86 per barrel and $63.96 per barrel, respectively, per EIA data. In the prior quarter, commodity prices were $63.54 per barrel, $62.17 per barrel and $68.17 per barrel, respectively, in the months of April, May and June, according to the EIA. Thus, in the first two months of the third quarter of 2025, the oil pricing environment was healthier sequentially, which is possibly backing the upper band of ExxonMobil’s projected earnings range.In its latest filings, XOM also revealed its expectations for the energy products business unit, stating that it is likely to generate earnings of $300 million to $700 million in the third quarter of 2025 due to favorable industry refining margins.XOM’s Strong Permian & Guayana Presence AidsIn the Permian, the most prolific basin in the United States, ExxonMobil has a strong presence. By the end of this decade, the energy major aims to boost its Permian production to 2.3 million barrels of oil equivalent (MMBoE/D), from roughly 1.6 MMBoE/D volumes it produced in the June quarter, thanks to the advanced technologies employed to enhance well recoveries.In offshore Guyana, XOM has made massive oil and gas discoveries over the years, estimating the recoverable reserves at 11 billion barrels of oil equivalent.Time to Bet on the Stock?Having a strong production outlook, XOM is also committed to returning capital to shareholders. Despite this, ExxonMobil’s dividend yield of 3.47% is lower than the 4.4% yield of the composite stocks belonging to the industry. In fact, the stock has been consistently rewarding lower yields than the industry over the past three years. BP plc BP and ChevronCorporation CVX, two other integrated energy majors, have, however, rewarded their shareholders with higher dividend yields. While BP’s current yield is 5.73%, Chevron’s yield is 4.45%. Image Source: Zacks Investment ResearchAlso, investors should note that the third-quarter 2025 results that XOM is scheduled to report on Oct. 31 will possibly highlight a weaker oil pricing environment compared to last year’s September quarter. This is reflected in the stronger oil prices of $81.80 per barrel, $76.68 per barrel and $70.24 per barrel in the respective months of July, August and September of 2024, per data from EIA.Also, in its latest short-term energy outlook, EIA came out with its expectations of a lower WTI oil price in 2025 of $65 per barrel compared with the prior year’s $76.6. Additionally, for 2026, EIA projects the WTI price to be even lower at $48.50 per barrel. It believes that the reason for declining crude prices is rising inventories of the commodity. Since XOM generates the majority of its earnings from upstream operations, the expectations of weakening crude prices will probably hurt its bottom line. The outlook for the upstream operations of both BP and CVX will also likely be affected.The weaknesses are getting reflected in XOM’s one-year price chart. In the past year, the stock has declined 4%, underperforming the 0.5% gain of the industry’s composite stocks. Image Source: Zacks Investment ResearchRegarding the valuation story, XOM is overvalued as reflected by the fact that it trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 7.32X, which exceeds the broader industry average of 4.49X. Also, compared to both BP and CVX, ExxonMobil stock is currently pricey. Image Source: Zacks Investment ResearchTo conclude, although XOM has a solid Permian and Guyana presence, investors shouldn’t rush to bet on the stock. However, those who have already invested can retain the stock. The company currently carries a Zacks Rank #3 (Hold). 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(BP): Free Stock Analysis Report Chevron Corporation (CVX): Free Stock Analysis Report Exxon Mobil Corporation (XOM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks
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