Exxon Mobil's Next Earnings Report on July 31 Could Send the Stock Soaring. Here's Why.

ExxonMobil (NYSE:XOM) plans to release its second-quarter financial results before the market opens on Friday, July 31. The oil giant has already hinted that it will report windfall profits during the period, driven by the war-fueled surge in oil prices.

Here’s a look at what to expect when ExxonMobil reports earnings later this week and why the report could send the oil stock soaring.

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A look back at the last quarter

ExxonMobil reported its first-quarter financial results in early May. The oil giant delivered mixed results. While it beat analysts' expectations ($1.16 per share of adjusted earnings compared to the $1.00 consensus estimate), its net income declined significantly despite higher oil prices. The company posted $4.2 billion of profits, its lowest level since the first quarter of 2021, down from $6.5 billion in the fourth quarter.

The culprit was war-driven supply disruptions, which prevented Exxon from settling financial hedges with the associated physical shipments. This unfavorable timing effect cost it $3.9 billion during the quarter. However, the company expected the hedging-related paper losses to unwind over the next few months as supply disruptions in the Middle East eased.

What to expect in the second quarter

ExxonMobil provided investors with a preliminary glimpse at its second-quarter financial results earlier this month. It indicated that its second-quarter earnings should be about $5 billion higher than the first quarter, driven by higher oil prices and improving refining margins.

The company expects its upstream earnings to rise by about $1.6 billion at the midpoint, driven by improved production and strong oil prices (the global oil benchmark Brent averaged $96.68 per barrel, up 23% compared to the first quarter). Meanwhile, its refining earnings could grow by about $2.6 billion, driven by timing effects. While the company will likely continue to face some timing impacts due to ongoing Persian Gulf supply disruptions and higher oil prices, the unwinding of prior timing impacts should significantly boost its second-quarter earnings.

Meanwhile, the company’s adjusted earnings should be even stronger. Analysts expect Exxon to report $15.7 billion of adjusted earnings during the second quarter, nearly double the first-quarter’s level.

The fuel to soar, depending on oil prices

ExxonMobil should report strong second-quarter results this week. That should give its stock the fuel to soar.

However, there’s just one potential wrinkle: oil prices. Crude has been extremely volatile this year. Brent oil was over $100 a barrel earlier this week after the U.S. and Iran resumed fighting. But it has cooled off considerably after the fighting stopped, and was recently around $85 a barrel. Oil could continue falling if there’s a peace deal to reopen the Strait of Hormuz, or it could rally sharply if fighting resumes.

That near-term volatility aside, ExxonMobil can thrive in the long term either way. The oil giant is in the middle of a multi-year transformational strategy to bolster profitability, which includes a major structural cost-savings program and heavy investment in developing its advantaged assets (lowest-cost and highest-margin). This strategy will drive double-digit annual earnings and cash flow growth through 2030, assuming the same oil prices and margins as in 2024. Further, it would enable the oil giant to generate $145 billion in cumulative surplus cash at an average Brent price of $65 a barrel. So, even if Exxon stock doesn’t soar after earnings due to lower oil prices, it has the fuel to deliver robust total returns in the coming years at much lower oil prices. That makes it a great long-term investment right now.

Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.