Exxon Mobil Earnings Preview: Short-Term Setbacks Won’t Change Long-Term Upside, Wall Street Collectively Raises Target Prices

Looking solely at the $0.89 EPS, one might conclude that ExxonMobil suffered a massive loss. However, decomposing the underlying structure of the financial report reveals that the matter is far from being so straightforward.

A sharp rise in oil prices provided the upstream business with up to $2.9 billion in additional profit growth. However, this was offset by massive book losses in the downstream business.

The company previously disclosed a significant timing mismatch between derivative contracts and physical cargo deliveries; USD derivatives must be marked-to-market and recognized in current earnings, leading the downstream segment to record approximately $5.3 billion in derivative losses in the first quarter, which reduced downstream earnings by $3.3 billion to $4.1 billion compared to the previous quarter.

Furthermore, supply chain disruptions resulted in the non-delivery of certain hedged cargoes, generating additional asset impairment losses of approximately $600 million to $800 million. The company stated these losses are merely issues of accrual timing that will be recovered in future quarters, though the report reads as a difficult one-time shock passing through.

While rising oil prices are certainly a positive for ExxonMobil, the blockade of the Strait of Hormuz caused the quarter's oil-equivalent production to decline by 6% from the previous quarter, equivalent to a daily loss of roughly 300,000 barrels relative to the 5-million-barrel-per-day baseline. Damage to LNG facilities in Qatar from missile attacks involves an extremely long repair period; this factor alone accounts for about 3% of the company's total production.

Despite first-quarter EPS nearly halving, Wall Street has been aggressively raising price targets ahead of the earnings report. J.P. Morgan raised its target from $140 to $170, maintaining an Overweight rating; Morgan Stanley slightly adjusted its target from $172 to $171, maintaining an Overweight rating; BNP Paribas upgraded the stock from Underperform to Neutral, sharply raising its target from $125 to $165; and BofA Securities upgraded its rating from Neutral to Buy on April 28, with a price target of $165.

The market has cast a firm vote of confidence in upstream profitability as oil prices remain elevated. On one hand, Q1 derivative losses are seen as timing issues that investors can distinguish from core earnings power; on the other hand, Q2 revenue is expected to rebound sharply to nearly $104.6 billion, with EPS projected to jump to $3.44.

Reflecting on the full year of 2025, EPS for the S&P 500 energy sector nearly doubled, yet energy stocks generally underperformed the broader market, primarily because the market remained skeptical about whether the oil price rally was driven by supply tightness rather than fundamental demand.

Currently, these doubts are being dispelled. For investors, the key focus is how much ExxonMobil actually earned from oil sales, stripping away one-time accounting figures like derivative losses. Friday's earnings release is expected to show investors exactly how strong this "true profitability" really is.

This content was translated using AI and reviewed for clarity. It is for informational purposes only.