Energy

Why Exxon's Dimmed Outlook Isn't Hurting Refiners' Stocks

Paul Ausick

Published: April 10, 2019 11:55 am

Last Updated: January 30, 2020 10:15 pm

In a Wednesday morning filing with the U.S. Securities and Exchange Commission, Exxon Mobil Corp. (NYSE: XOM) said it expects downstream (refining and marketing) earnings to drop sequentially by an estimated $1.3 billion due to higher crude oil prices in the first quarter. On top of that, the oil and gas giant is looking at a decline of around $600 million in its derivatives trading activities.

The impact of the announcement has pushed the share price down by about 0.4% due to an expected overall increase in the price it gets for its crude. While refining and trading revenues and profits are important to the company’s bottom line, the stock price is more affected by the price of crude.

A quick look at the largest U.S. refiners shows solid gains in Wednesday morning trading, with PBF Energy Inc. (NYSE: PBF) posting a gain of more than 4% and HollyFrontier Corp. (NYSE: HFC) up more than 3%. Here’s a look at analysts’ expectations for the nation’s three largest independent refiners.

Phillips 66 (NYSE: PSX) will report first-quarter results on April 30, and analysts expect earnings per share (EPS) of $0.69 on revenues of $24.61 billion. In the same period a year ago, EPS came in at $1.04 and revenues totaled $24.05 billion. In the fourth quarter of 2018, Phillips 66 reported EPS of $4.87, largely due to lower crude prices. The stock closed at $97.37 on Tuesday, compared to the 12-month consensus price target of $119.73, indicating a potential upside of about 23%. Shares were trading up about 1.2% late Wednesday morning, at $98.54 in a 52-week range of $78.44 to $123.97.

Marathon Petroleum Corp. (NYSE: MPC) reports first-quarter results on May 8, and analysts are looking for EPS of $0.39 and revenues of $28.02 billion. Marathon completed its acquisition of Andeavor on October 1, 2018, so comparisons to last year’s results are meaningless. In the fourth quarter, Marathon reported EPS of $2.22. The stock closed at $62.16 on Tuesday, compared to a 12-month consensus price target of $89.60, implying an upside of 44%. Shares traded up about 1.4% late Wednesday morning, at $63.06 in a 52-week range of $54.29 to $88.45.

Valero Energy Corp. (NYSE: VLO) reports first-quarter results on April 25. Analysts are looking for EPS of $0.38 and revenues of $21.79 billion. A year ago Valero posted EPS of $1.00 and revenues of $26.44 billion. In the fourth quarter, the company’s EPS was $2.12. The stock closed at $85.11 on Tuesday, and the 12-month consensus price target is $102.05, indicating a potential upside of 19.9%. Shares traded up 2.4% Wednesday morning, at $87.15 in a 52-week range of $68.81 to $126.98.

The first quarter is traditionally weak for refiners who begin cutting production to conduct routine maintenance and to switch over to summer grade fuel mixtures. Higher crude prices exacerbate the differences we are likely to see this year.