A month has gone by since the last earnings report for Imperial Oil (IMO). Shares have added about 1.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Imperial Oil due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Imperial Oil Q2 Earnings Up Year-Over-Year
Imperial Oil released third-quarter 2019 results wherein it missed on both earnings and revenues. Earnings per share of 42 cents lagged the Zacks Consensus Estimate of 44 cents, due to weaker contribution from the company’s upstream and downstream segments. The Canadian integrated oil and gas player’s bottom line also plunged from the year-ago figure of 75 cents.
However, third-quarter revenues of $6.62 billion fell short of the Zacks Estimate of $6.7 billion. Moreover, the top line decreased from the year-ago figure of $7.4 billion.
Upstream: Revenues of C$3,105 million were down from third-quarter 2018’s C$3,262 million. The segment’s profit of C$209 million also came in below C$222 million in the year-ago period. This underperformance was induced by higher operating expense of C$302 million in the upstream segment compared with C$257 million in the prior year.
Net production volumes during the quarter under review averaged 360,000 barrels of oil equivalent per day (Boe/d) compared with 353,000 Boe/d in the year-ago period. Total oil and NGL output amounted to 338,000 barrels per day (BPD) compared with 332,000 BPD in third-quarter 2018. Net oil and NGL output from Kearl and Cold Lake totalled 154,000 bpd and 110,000 bpd, respectively. Syncrude output averaged 60,000 BPD, rising 33.33% from the year-earlier quarter on stronger asset reliability. Net natural gas production came in at 131 million cubic feet per day (Mcf/d), higher than 127 Mcf/d in the comparable quarter last year.
Bitumen (accounting for 75% of the output) price realizations summed C$51.12 a barrel, up from C$50.42 in the year-ago quarter. The company received average realized price of C$77.27 per barrel of synthetic oil compared with the year-ago quarter’s C$89.70. For conventional crude oil, it received C$53.90 per barrel compared with the year-ago figure of C$74.02. Prices of NGL and gas declined year over year to C$14.96 a barrel and C$1.36 per thousand cubic feet, respectively.
Downstream: Revenues totalled C$6,612 million, declining from $7,330 million in third-quarter 2018. Also, net income of C$221 million decreased from C$502 million due to lower margins and planned turnaround impacts.
Refinery throughput in third-quarter 2019 averaged 363,000 BPD, reflecting a decline from the prior-year level of 388,000 BPD. Capacity utilization of 86% deteriorated from 92% in the corresponding quarter of last year. Petroleum product sales were 488,000 BPD compared with the prior-year level of 516,000 BPD.
Chemical: Revenues of C$298 million were down from C$408 million in third-quarter 2018. Net income was recorded at C$38 million compared with the year-ago figure of C$69 million. This decline is due to lower industry margins.
Total Costs & Capex
Total expenses of C$8,182 million were lower than the year-ago level of C$8,706 million. In the quarter under review, the company’s total capital and exploration expenditures were C$442 million, higher than the year-ago level of C$376 million. Of the total expenditure, 68.32% was allotted to the upstream segment.
Imperial Oil’s cash flow from operating activities came in at C$1,376 million in the quarter under review. The figure improved from the year-ago level of C$1,207 million.
Importantly, the company paid back C$512 million to its shareholders through dividends and share buybacks in the reported quarter. It also paid out 22 Canadian cents as dividend per share compared with 19 Canadian cents a year ago.
Imperial Oil repurchased 9.8 million shares worth C$343 million including those bought from ExxonMobil.
As of Sep 30, the company held C$1,531 million in cash and cash equivalents. Its long-term debt amounted to C$5,161 million, representing a debt-to-capital ratio of 17.1%.
For 2019, this company’s total capital expenditure is now expected in the range of C$1.8-C$1.9 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -19.3% due to these changes.
At this time, Imperial Oil has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Imperial Oil has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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