Chevron Corporation (CVX Quick QuoteCVX - Free Report) is slated to release second-quarter 2024 results on Aug 2, before market open. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings and revenues is pegged at $2.88 per share and $50.8 billion, respectively. 

The earnings estimates for the to-be-reported quarter have been revised downward by 17.9% over the past 30 days. The bottom-line projection indicates a decline of 6.5% from the year-ago reported number. The Zacks Consensus Estimate for quarterly revenues, however, suggests a year-over-year increase of 3.9%.

For the current year, the Zacks Consensus Estimate for CVX’s revenues is pegged at $202.9 billion, implying a rise of a modest 1% year over year. The consensus mark for 2024 EPS is pegged at $12.45, indicating a contraction of around 5.2%. 

In the trailing four quarters, the San Ramon, CA-based oil and gas company surpassed EPS estimates thrice and missed once, as reflected in the chart below.
 

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Chevron this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. 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.

CVX has an Earnings ESP of 0.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

What’s Shaping Q2 Results?

Chevron’s second-quarter results are likely to get a boost from a reasonably solid oil price environment. According to the U.S. Energy Information Administration, in April, May and June of 2023, the average monthly WTI crude price was $79.45, $71.58 and $70.25 per barrel, respectively. In 2024, average prices were $85.35 in April, $80.02 in May and $79.77 in June, i.e., much stronger year over year.  

Make sure to keep an eye on the company’s production, which rose 12.3% in the last quarter and could be up again in the second quarter, primarily reflecting the contribution from the PDC Energy acquisition and robust output in the showpiece Permian Basin region. As a matter of fact, for the to-be-reported quarter, the Zacks Consensus Estimate for Chevron’s total volume is pegged at 3,242 thousand oil-equivalent barrels per day (MBOE/d), indicating a rise from the prior-year quarter’s output of 2,959 MBOE/d.

A combination of the above-mentioned factors is likely to have provided a boost to the company’s second-quarter upstream segment income. Consequently, the Zacks Consensus Estimate of $5.1 billion implies an increase of $131 million year over year. 

However, a lower downstream margin is likely to have been a headwind for Chevron. Refinery turnarounds at El Segundo and Richmond are also expected to have hampered segment earnings. The Zacks Consensus Estimate for CVX’s second-quarter downstream income is pegged at $857 million, implying a plunge from $1.5 billion recorded in the year-ago period.

Price Performance & Valuation

Year to date, Chevron has underperformed the industry, sector and S&P 500.

One-Year Price Comparison

Image Source: Zacks Investment Research

From a valuation standpoint, Chevron's forward earnings multiple is significantly higher than most of its peers. Despite strong financial performance, the elevated valuation indicates that Chevron is expensive relative to other major oil companies, especially the European ones like Shell (SHEL Quick QuoteSHEL - Free Report) .

Price/Earnings F12M

Image Source: Zacks Investment Research

Assessing Chevron’s Prospects

Chevron’s long-term projects and investments in the oil and gas sector are designed to yield benefits over years or even decades, not quarters. This broad horizon can provide substantial returns despite short-term market fluctuations. For investors with patience, Chevron's strategic positioning can result in significant future gains once the current market volatility subsides.

Chevron also maintains a robust financial structure with a significant shareholder payout. The company's dividend yield of above 4% is attractive, particularly for income-focused investors, offering a steady income stream even when share prices are stagnant.

However,  the ongoing volatility in oil prices due to geopolitical events and OPEC+ decisions poses significant risks to short-term performance. The broader energy sector is experiencing a period of uncertainty with potential over-supply concerns and fluctuating demand.

Finally, Chevron's planned takeover of  Hess Corporation (HES Quick QuoteHES - Free Report) faces regulatory scrutiny and legal challenges from ExxonMobil (XOM Quick QuoteXOM - Free Report) , which claims preemptive rights over the Hess stake, potentially delaying the merger's completion. This uncertainty around the deal's completion poses a significant risk factor.

Is it the Right Time to Buy CVX?

Chevron’s buyout of PDC Energy is set to drive substantial production growth, particularly in the DJ Basin. This acquisition, alongside OPEC’s price support, positions Chevron for robust profit expansion. As one of only two energy stocks on the list of Dividend Aristocrats, the supermajor’s balance sheet is reasonably healthy too, indicating that the dividend should remain safe going forward. Chevron's commitment to returning cash to shareholders was also exemplified by $6 billion returned in the most recent quarter. Moreover, eight consecutive quarters of more than $5 billion in cash returns underscores its financial strength and investor-friendly approach.

At the same time, investors should note that any dip in oil prices is going to hurt Chevron, whose production profile is heavily tilted toward crude. Therefore, given the company's currently stretched valuation, it will be prudent for investors to wait for more clarity and stability before taking a position in the stock. In other words, we wouldn't recommend buying CVX stock until it delivers a superior operational performance in the upcoming release.