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

TradingKey - Before the U.S. market open on May 1, ET, the world's largest publicly traded energy giant, ExxonMobil ( XOM.US) will release its fiscal first-quarter 2026 earnings report, marking its first full quarterly results since the outbreak of the Hormuz conflict.

The company is expected to achieve revenue of $85.295 billion this quarter, a year-over-year increase of 2.60%; expected earnings per share (EPS) is $0.89, a year-over-year decrease of 49.52%. In the previous quarter, the company reported EPS of $1.53, missing the analyst estimate of $1.66.

Notably, market expectations for ExxonMobil's second-quarter revenue are as high as nearly $104.6 billion, with projected EPS reaching approximately $3.44.

The Real Reason Returns Were Halved

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.

Wall Street sentiment has become overwhelmingly one-sided.

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.