With more than 77% of Wall Street companies reporting their earnings for the second quarter, the season is not as gloomy as initially believed. According to the data, 76% of S&P 500 companies have reported a positive EPS surprise, while 59% have reported a positive revenue surprise.
As a whole, even the S&P 500 and Nasdaq to close their worst week since the beginning of the year, the market was almost indifferent to Q2 earnings. The recent 10% tariff announcement, which Trump is planning on executing on China September 1, has been the cause of the markets recent tumble.
The second-quarter earnings are providing few surprises, as possibly the biggest is that earnings guidance for the second half of the year is not collapsing as some feared they might. The slower global economy, and the related tariff and trade war, is proving a drag on many corporations that get significant revenues overseas, but earnings guidance overall for the second half is not collapsing and can best be described as “flattish”. Moreover, the dovish central banks (including the Federal Reserve) are providing a backstop to corporate earnings and slower global growth.
Last week was among the busiest within the earnings season. Two of the world’s largest energy companies – Chevron and Exxon – had reported their financial statements, as well as the technology giant Apple.
The earnings reports of the largest energy companies in the US are mixed, but on average both companies had experienced troubles during the second quarter, despite the growth in shale production.
Chevron reported a 26.3% profit growth in the second quarter
The company benefited from a 1 billion USDfee it received after Occidental Petroleum exceeded its 33 billion USD bid to acquire Anadarko Petroleum by offering to pay 38 billion USD. The fee was added to 720 million USD in revenue for the quarter.
Shale gas production in the US grew by 21% during the quarter but was overshadowed by much lower oil and gas prices. Like many of its competitors, Chevron also announced a decline in profits in its oil refining units.
Chevron abandoned its plans to acquire Anadarko in May, refusing to raise its bid. Occidental announced this week that it expects to finalize the purchase quickly after Anadarko’s shareholders vote on August 8.
The daily oil and gas output of the second-largest US oil and gas company rose by 9.1% to 3.08 million barrels, a record for the company. Yields in the Permian Basin, a major shale field in the United States, increased 21.5% compared to the same period last year
The company said it had resumed its share buyback, which it had frozen during the negotiations to acquire Anadarko. It expects to buy back stocks worth 5 billion USD in the quarter.
The net profit, which will be distributed to the company’s shareholders, rose to 4.31 billion USD, or 2.27 USD per share, in the second quarter from 3.41 billion USD, or 1.78 USD per share a year earlier.
Exxon Mobil announced a 21% drop in its second quarter earnings
The US oil concern Exxon Mobil announced a 21% drop in its second-quarter earnings. This is the third consecutive drop in its financial results after a sharp jump in oil production was offset by the weaker performance of its refining and chemical units.
Exxon’s weaker performance is in line with competitors such as Royal Dutch Shell, Equinor and Total. Shell announced its weakest profit in 30 months, and Total said its profit dropped 19% year-on-year. Equinor announced a 27% drop in its profits amid falling oil and gas prices.
However, Exxon’s oil and gas production unit performed well with a growth of 7% to 3.9 million barrels per day. Extraction from the leading shale field in the US, the Permian Basin, has grown to 274,000 barrels of oil and gas a day. This is an increase of 90% over the same period last year.
The largest US oil producer’s net profit fell to 3.13 billion USD, or 0.73 USD per share, in the second quarter from 3.95 billion USD, or 0.92 USD per share, in the same period last year.
The sale proceeds are needed to fund shareholder returns and major projects, Exxon announced revenue from the sale of assets worth only 33 million USD over the period. This is their lowest level since at least 12 quarters. In the first quarter, revenue reached 107 million USD.
Exxon’s chemical business registered a loss in the US for the first time in at least three years. The refining division’s profit declined by 88% last year.
Exxon is investing in major projects to stimulate production at a time when investors are pushing for oil companies to cut costs and increase shareholder returns. The company has announced that it has its best portfolio in the merger of Exxon and Mobil and should do nothing in terms of asset addition.
But in the Permian Basin, where Exxon has 1.6 million acres, the company plans to use its scale as a competitive advantage and keeps its eyes open for new mergers and acquisitions.