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Chevron: This is How to Play the Stock Going Into Q3 Earnings
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Chevron Corporation (CVX - Free Report) is slated to release third-quarter 2024 results on Nov. 1, before market open. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings and revenues is pegged at $2.66 per share and $51.1 billion, respectively.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
The earnings estimates for the quarter have been revised downward by 4.7% over the past 30 days. The bottom-line projection indicates a decline of 12.8% from the year-ago reported number. The Zacks Consensus Estimate for quarterly revenues, meanwhile, suggests a year-over-year increase of 5.5%.
For the current year, the Zacks Consensus Estimate for CVX’s revenues is pegged at $200.2 billion, implying a drop of a modest 0.4% year over year. The consensus mark for 2024 EPS is pegged at $10.86, indicating a contraction of around 17.3%.
Image Source: Zacks Investment Research
In the trailing four quarters, the San Ramon, CA-based oil and gas company surpassed EPS estimates twice and missed in the other two, as reflected in the chart below.
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.
Chevron’s third-quarter results are likely to have been pulled down by a weaker oil and natural gas price environment. According to the U.S. Energy Information Administration, in July, August and September of 2023, the average monthly WTI crude price was $76.07, $81.39 and $89.43 per barrel, respectively. In 2024, average prices were $81.80 in July, $76.68 in August and $70.24 in September, i.e., mostly lower year over year.
The news is even more bearish on the natural gas front. In Q3 of 2023, U.S. Henry Hub average natural gas prices were $2.55 per MMBtu in July, $2.58 in August and $2.64 in September. Coming to 2024, the fuel traded at $2.07, $1.99 and $2.28 per MMBtu in July, August and September, respectively. In other words, natural gas traded noticeably lower in all three months.
The drop in commodity realizations is likely to have affected the company’s third-quarter upstream segment income. Consequently, the Zacks Consensus Estimate of $4.2 billion implies a decrease of $1.6 billion year over year.
However, make sure to keep an eye on the company’s production, which rose 11.3% in the last quarter and could be up again in the third 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 3,278 thousand oil-equivalent barrels per day (MBOE/d), indicating a rise from the prior-year quarter’s output of 3,146 MBOE/d.
Meanwhile, a lower downstream margin is likely to have been a headwind for Chevron. Exposure to weak crack spreads on the West Coast, presents a structural disadvantage. California’s tightening regulatory stance on fossil fuels is also expected to have hampered segment earnings. The Zacks Consensus Estimate for CVX’s third-quarter downstream income is pegged at $764 million, implying a plunge from $1.7 billion recorded in the year-ago period.
Chevron Stock Price Performance & Valuation
Year to date, Chevron has underperformed rival ExxonMobil (XOM - Free Report) , the industry and the S&P 500.
CVX and XOM Stock Performance Comparison
Image Source: Zacks Investment Research
From a valuation standpoint, Chevron stock appears attractive. It is trading at a multiple of 5.95 based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization). This is more than 6% below its 10-year average and compares favorably to ExxonMobil.
Image Source: Zacks Investment Research
Assessing Chevron’s Prospects: Stay Away From the Stock
While Chevron remains a quality business with a fairly impressive inventory of upstream development projects that will drive production growth in the long run, the company’s overall outlook is clouded by a plethora of issues.
Chevron’s $53 billion acquisition of Hess (HES - Free Report) introduces both opportunity and risk, particularly in light of antitrust review requirements recently completed by the Federal Trade Commission. This transaction, while potentially synergistic, is complex—especially given that John Hess will not join Chevron’s board. Additionally, realizing synergies and successfully integrating Hess’s assets into Chevron’s operations will be challenging and may take years, potentially weighing on the financial performance in the near term.
The company’s dividend safety seems to be taking a hit since 2023, with its payout ratio climbing to 54. Such an increase in payouts could strain cash flow, especially during sector downturns. While dividend reliability attracts investors, a continually rising payout ratio might trigger concerns over Chevron's ability to sustain dividends without compromising its balance sheet stability.
Last but not the least, CVX remains highly exposed to oil price volatility, which is a primary determinant of its cash flow and profitability. Therefore, potential investors would be wise to avoid the stock and look for better opportunities elsewhere.
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Chevron: This is How to Play the Stock Going Into Q3 Earnings
Chevron Corporation (CVX - Free Report) is slated to release third-quarter 2024 results on Nov. 1, before market open. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings and revenues is pegged at $2.66 per share and $51.1 billion, respectively.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
The earnings estimates for the quarter have been revised downward by 4.7% over the past 30 days. The bottom-line projection indicates a decline of 12.8% from the year-ago reported number. The Zacks Consensus Estimate for quarterly revenues, meanwhile, suggests a year-over-year increase of 5.5%.
For the current year, the Zacks Consensus Estimate for CVX’s revenues is pegged at $200.2 billion, implying a drop of a modest 0.4% year over year. The consensus mark for 2024 EPS is pegged at $10.86, indicating a contraction of around 17.3%.
In the trailing four quarters, the San Ramon, CA-based oil and gas company surpassed EPS estimates twice and missed in the other two, as reflected in the chart below.
Chevron Corporation Stock Price and EPS Surprise
Chevron Corporation price-eps-surprise | Chevron Corporation Quote
Chevron 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 4.30% and a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank stocks here.
What’s Shaping Q3 Results?
Chevron’s third-quarter results are likely to have been pulled down by a weaker oil and natural gas price environment. According to the U.S. Energy Information Administration, in July, August and September of 2023, the average monthly WTI crude price was $76.07, $81.39 and $89.43 per barrel, respectively. In 2024, average prices were $81.80 in July, $76.68 in August and $70.24 in September, i.e., mostly lower year over year.
The news is even more bearish on the natural gas front. In Q3 of 2023, U.S. Henry Hub average natural gas prices were $2.55 per MMBtu in July, $2.58 in August and $2.64 in September. Coming to 2024, the fuel traded at $2.07, $1.99 and $2.28 per MMBtu in July, August and September, respectively. In other words, natural gas traded noticeably lower in all three months.
The drop in commodity realizations is likely to have affected the company’s third-quarter upstream segment income. Consequently, the Zacks Consensus Estimate of $4.2 billion implies a decrease of $1.6 billion year over year.
However, make sure to keep an eye on the company’s production, which rose 11.3% in the last quarter and could be up again in the third 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 3,278 thousand oil-equivalent barrels per day (MBOE/d), indicating a rise from the prior-year quarter’s output of 3,146 MBOE/d.
Meanwhile, a lower downstream margin is likely to have been a headwind for Chevron. Exposure to weak crack spreads on the West Coast, presents a structural disadvantage. California’s tightening regulatory stance on fossil fuels is also expected to have hampered segment earnings. The Zacks Consensus Estimate for CVX’s third-quarter downstream income is pegged at $764 million, implying a plunge from $1.7 billion recorded in the year-ago period.
Chevron Stock Price Performance & Valuation
Year to date, Chevron has underperformed rival ExxonMobil (XOM - Free Report) , the industry and the S&P 500.
CVX and XOM Stock Performance Comparison
From a valuation standpoint, Chevron stock appears attractive. It is trading at a multiple of 5.95 based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization). This is more than 6% below its 10-year average and compares favorably to ExxonMobil.
Assessing Chevron’s Prospects: Stay Away From the Stock
While Chevron remains a quality business with a fairly impressive inventory of upstream development projects that will drive production growth in the long run, the company’s overall outlook is clouded by a plethora of issues.
Chevron’s $53 billion acquisition of Hess (HES - Free Report) introduces both opportunity and risk, particularly in light of antitrust review requirements recently completed by the Federal Trade Commission. This transaction, while potentially synergistic, is complex—especially given that John Hess will not join Chevron’s board. Additionally, realizing synergies and successfully integrating Hess’s assets into Chevron’s operations will be challenging and may take years, potentially weighing on the financial performance in the near term.
The company’s dividend safety seems to be taking a hit since 2023, with its payout ratio climbing to 54. Such an increase in payouts could strain cash flow, especially during sector downturns. While dividend reliability attracts investors, a continually rising payout ratio might trigger concerns over Chevron's ability to sustain dividends without compromising its balance sheet stability.
Last but not the least, CVX remains highly exposed to oil price volatility, which is a primary determinant of its cash flow and profitability. Therefore, potential investors would be wise to avoid the stock and look for better opportunities elsewhere.