This earnings season has been pretty dicey, with disappointing results from vaunted names like Netflix (NASDAQ:NFLX) and Facebook (NASDAQ:FB) weighing on the markets. But on the other end of the spectrum, sentiment was generally positive for Exxon Mobil (NYSE:XOM) and XOM stock ahead of the oil giant’s second-quarter 2018 earnings report.

Much of the enthusiasm centers on the underlying energy market. For the year so far, and just ahead of the Q2 disclosure, the international benchmark Brent Crude Oil gained 12%. Traders were even more bullish on the domestic index, West Texas Intermediate, which was up 15.6% heading into Q2.

Obviously, this is a welcome sign from the catastrophic losses witnessed in the energy markets in 2014. Furthermore, oil prices didn’t start climbing until around this time last year.

XOM stock has benefited from favorable timing in the past. What makes this present juncture different is the combination of fundamental tailwinds. Helping boost the oil recovery are several supply-constraint issues.

Primarily, President Trump made no secret about his beef with Iran, and the prior administration’s Iranian nuclear deal. That said, Trump didn’t just nix the deal as promised; he also sharply criticized the Iranian government, almost ensuring no normalcy in relations for at least several years. Plus, our new foreign policy has us cozying up to Saudi Arabia, Iran’s arch-nemesis.

Within the oil cartel OPEC, Iran is the third-biggest producer. Statistically, that translates to two million barrels exported daily.

Closer to home, political crisis in Venezuela renders that oil-rich region unstable. Beyond the geopolitical drama, a much-improved labor market has put more dollars in workers’ pockets. Thus, it’s no surprise that between July 20 and the Q2 release, XOM stock gained 3.5%.

But did it convert this momentum into meaningful results?

Exxon Mobil Earnings Produce a Mixed Bag

On many levels, Exxon Mobil continued its impressive recovery track. However, the most commonly cited metric, earnings-per-share, was a head-scratching miss.

Going into the Q2 disclosure, consensus estimates pegged EPS at $1.27. This was near the upper-end of estimates, which ranged from $1.14 to $1.33. However, the earnings came in at 92 cents, which was a negative earnings surprise of nearly 28%. The optics were particularly bad because the earnings figure was 19% below the most pessimistic target.

The revenue story was an exercise in contrast. The Street consensus estimated top-line sales at $72.58 billion. Exxon Mobil rang up $73.5 billion, up 1.3% from consensus. In the year-ago quarter, the oil firm registered $60.83 billion. This was a clear affirmation that the energy sector is enjoying a robust recovery. It also signaled that Exxon Mobil can continue looking forward to out-sized gains.

Unfortunately, the sales enthusiasm didn’t prevent XOM stock from getting hit with selling pressure in pre-market trading. On a CNBC broadcast, Exxon Mobil SVP Neil Chapman explained that substantial maintenance efforts deteriorated the bottom line. Specifically, Chapman mentioned that between Q1 and Q2, maintenance accounted for an approximately $800 million impact, especially in refineries.

CNBC reporter Rebecca Quick inquired about why the investment community didn’t anticipate such a huge impact on refinery maintenance, which is a recurring reality for oil firms. Chapman explained that much of it was unplanned and therefore not part of the forecasted picture.

While the downstream portion of Exxon Mobil’s business disappointed, the bulls at least enjoyed upstream success. This segment focuses on activities such as oil exploration and development. Profits here more than doubled to $3 billion.

Sound Financial Strategies Bolster XOM Stock

Despite Q2’s mixed signals, a bullish platform remains for XOM stock. As we discussed earlier, the geopolitical situation is overall favorable — some nearer-term risks exist with the China tariffs as oil producers make their adjustments — because of our “cowboy” foreign policy.

Unlike prior administrations where the President had some political background, Trump is a pure businessman. Don’t get me wrong: such expertise is beneficial for the economy. Moreover, it’s a refreshing take from the constant barrage of career politicians.

But a politician knows how to play the diplomacy game. You never lock yourself into one stance, always giving yourself options in case an initial strategy goes awry. That’s not Trump’s style by any means. I argue this has proved disadvantageous in situations like our complex relationship with Iran. In turn, the chaos has bolstered XOM stock due to restricted supply issues.

But even if Exxon Mobil lacked these geopolitical tailwinds, I’d still be bullish on XOM stock longer-term. Following the 2014 sector collapse, management has made a concerted effort keeping its financials as clean as possible.

You see the evidence in the balance sheet, with debt levels steadily declining over the years. That’s an impressive feat given that oil producers typically drove up debt to stay alive. Moreover, on the cashflow statement, capital expenditures have declined to meet market realities.

Only recently has cap-ex ticked up as market sentiment improved. In this most recent quarter, cap-ex for oil and gas jumped 69% due to investments in the Permian basin, Brazil and Indonesia. As a potential shareholder, I appreciate that Exxon Mobil has maintained its fiscal discipline, and striking when appropriate. Ultimately, this is what gives me confidence in XOM stock.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

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