Is Imperial (IMO) Headed for Another Earnings Beat in Q3?

Imperial Oil Limited IMO is set to release third-quarter results on Oct 28. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of $2.14 per share on revenues of $14.1 billion.

Let’s delve into the factors that might have influenced the integrated energy company’s performance in the September quarter. But it’s worth taking a look at IMO’s previous-quarter performance first.

Highlights of Q2 Earnings & Surprise History

In the last reported quarter, the Calgary, Canada-based petroleum operator beat the consensus largely due to better demand and stronger commodity prices. Imperial Oil had reported adjusted earnings per share of $2.84, ahead of the Zacks Consensus Estimate of $2.32. However, revenues of $13.6 billion underperformed the Zacks Consensus Estimate by 20.2% on lower upstream production volumes.

IMO beat the Zacks Consensus Estimate for earnings twice in the last four quarters and missed in the other two, resulting in an earnings surprise of 2.4%, on average. This is depicted in the graph below:

Imperial Oil Limited Price and EPS Surprise

Imperial Oil Limited Price and EPS Surprise

Imperial Oil Limited price-eps-surprise | Imperial Oil Limited Quote

 

Trend in Estimate Revision

The Zacks Consensus Estimate for the third-quarter bottom line has been revised 5.4% upward in the last seven days. The estimated figure indicates a 109.8% jump year over year. The Zacks Consensus Estimate for revenues, meanwhile, suggests a 73.2% increase from the year-ago period.

Factors to Consider

Imperial is expected to have benefited from the surge in hydrocarbon realizations. In the second quarter of 2022, the company’s bitumen price realizations averaged C$112.27 a barrel, up from C$57.26 in the year-ago quarter. Further, IMO received an average realized price of C$144.67 per barrel of synthetic oil compared with the year-ago quarter’s C$80.80.

For conventional crude oil, it received C$115.80 per barrel, while a year ago, the company got C$58.44. Prices of NGL increased to C$69.19 a barrel, while the same of gas rose to C$6.81 per thousand cubic feet year over year. The uptick is most likely to have continued in the to-be-reported quarter, thanks to the sharp rise in commodity prices following geopolitical tensions, strained supply and robust demand. This price boost is likely to have buoyed the third-quarter revenues and cash flows of Imperial Oil.

IMO is also expected to have reaped the reward of a better macro environment in its downstream (or refining) unit. In the previous quarter, segment revenues of C$18,785 million were up significantly from C$5,831 million in the second quarter of 2021. Moreover, the segment earned a net income of C$1,033 million compared with a mere C$60 million reported in the year-ago quarter. The positive movement is expected to have continued in the to-be-reported quarter, with post-pandemic demand recovery driving margins higher.

On a somewhat bearish note, IMO’s total cost of goods sold in the April-June quarter surged 86.6% quarter over quarter to C$14,141 million. The upward cost trajectory is likely to have continued in the third quarter due to inflationary pressures.

What Does Our Model Say?

The proven Zacks model does not conclusively show that IMO is likely to beat estimates in the third quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, for this company is -4.09%.

Zacks Rank: IMO currently carries a Zacks Rank #3.

Stocks to Consider

While an earnings beat looks uncertain for Imperial Oil, here are some firms from the energy space that you may want to consider on the basis of our model:

Comstock Resources CRK has an Earnings ESP of +1.04% and a Zacks Rank #1. The firm is scheduled to release earnings on Nov 1.

You can see the complete list of today’s Zacks #1 Rank stocks here.

For 2022, Comstock Resources has a projected earnings growth rate of 230.2%. Valued at around $3.9 billion, CRK has gained 57.5% in a year.

PBF Energy PBF has an Earnings ESP of +10.30% and a Zacks Rank #2. The firm is scheduled to release earnings on Oct 27.

PBF topped the Zacks Consensus Estimate by an average of 78% in the trailing four quarters, including a 43.8% beat in Q2. PBF has gained 170.7% in a year.

ExxonMobil XOM has an Earnings ESP of +1.39% and a Zacks Rank #2. The firm is scheduled to release earnings on Oct 28.

The Zacks Consensus Estimate for XOM’s 2022 earnings has been revised 3.8% upward over the past 60 days. Valued at around $441.2 billion, ExxonMobil has lost 65.6% in a year.

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