(Reuters) – Exxon Mobil shares fell nearly 2% in early trading on Wednesday after the top U.S. oil producer warned of a drop in fourth-quarter refining profits and weak returns across the board. its operations.
The industry leader’s earnings outlook signaled a challenging environment as companies grapple with pricing pressure amid demand volatility.
Exxon expects fourth-quarter earnings to be about $1.75 billion lower than the previous quarter.
For much of last year, Exxon and other oil majors faced reduced profitability from refining crude oil and selling petroleum products as the post-pandemic demand boom ended. The opening of large plants around the world also affected the growth of refining margins.
In the third quarter, Exxon’s profits fell 5% from the year-earlier quarter, while Chevron’s fell 21%.
Exxon’s earnings update is “consistent with revisions seen for independent refiners and other large companies with strong refining exposure,” Biraj Borkhataria, oil analyst at RBC Capital Markets, said in a note to investors.
The snapshot will likely be seen as “negative” and will weigh on the stock in the near term, he added.
Exxon is one of the world’s largest refiners with a total global refining capacity of 4.5 million barrels of oil per day and is also one of the world’s largest manufacturers of raw materials and specialty chemicals.
The company is expected to post a profit of $1.76 per share in the fourth quarter, according to data compiled by LSEG. The oil company earned a profit of $2.48 per share the previous year.
Exxon has a price-earnings (PE) ratio of 13.56 compared to Chevron’s 16.43. A lower PE multiple indicates a more attractive investment opportunity.
Exxon shares are up 7.6% in 2024, lagging the S&P 500’s gain of 23.3%.
(Reporting by Mrinalika Roy in Bengaluru; Editing by Sriraj Kalluvila)