Saudi Aramco stock price gains despite tumbling Q3 profit

Saudi Aramco (SE: 2222) stock price closed the day 0.58% in the green after the oil titan reported third-quarter earnings. 

Fundamental analysis: Weak demand due to coronavirus

Saudi Aramco posted a 44.6% plunge in net profit in the third quarter as the coronavirus pandemic keeps weighing on demand and crude prices.

Stocks of oil companies plummeted this year as a result of fears among investors over the weak energy demand due to the coronavirus crisis.

Oil prices hit the nearly 2-decade bottom following the virus outbreak in March, and have barely recovered since, stimulating oil giants like Aramco, Shell and BP to cut capital spending this year and in 2021.

Lower refining and chemicals margins also weighed on Aramco’s net profit, sending it down to 44.21 billion riyals ($11.79 billion) during the three months through September 30, almost matching the consensus estimates of 44.6 billion riyals but missing the 79.84 billion riyals from the same period last year.

“We saw early signs of a recovery in the third quarter due to improved economic activity, despite the headwinds facing global energy markets,” said CEO of Saudi Aramco, Amin Nasser.

Shares of Saudi Aramco climbed by 1% and were 0.6% in the green at 34.4 riyals by 0830 GMT. However, even though its shares are 2.3% in the red since the start of the year, Aramco has outstripped its rivals including Exxon, BP and Shell, whose shares plummeted by more than 50% while Chevron is 40% in the red.

Aramco’s better performance compared to its peers is partly due to the broader performance of the Saudi stock market, where Aramco is listed. The other reason is that Aramco has committed to paying dividends.

The oil giant said it would pay a dividend of $18.75 billion for the quarter, in accordance with its decision to pay a base dividend of $75 billion for this year.

Technical analysis: Shares trade higher

Saudi Aramco stock price has extended weekly gains to over 2% to erase about half of last week’s losses (-4.53%). Shares traded nearly 2% higher at one point before settling at 34.40, or 0.58% positive on the day. 

Saudi Aramco share price has managed to close above the 200-DMA at 34.34 as it works its way towards 35.00, where the key short-term resistance line is located. Click here to read about the best long-term stocks to buy in November.

Summary

State-owned oil behemoth Saudi Aramco reported a 44.6% fall in net profit in the third quarter as the coronavirus pandemic continues to hurt energy demand and crude prices.