Down 18% Since 2023, How Will CVX Stock Trend Post Q4 Results?

Chevron Corporation (NYSE: CVX), a company manufacturing and selling a range of refined petroleum products, including gasoline, diesel, marine, and aviation fuels, premium base oil, finished lubricants, and fuel oil additives, is scheduled to announce its fiscal fourth-quarter results on Friday, February 2. We expect the company’s stock to likely trade higher with its revenues and earnings coming ahead of expectation in its fourth quarter results. Chevron has a diversified business with exposure to the entire energy value chain but still, oil prices are a big driver of financial performance. That said, OPEC’s production cuts have supported higher crude oil prices in 2023, benefiting Chevron’s profitability. Even if oil price trends lower going forward, Chevron is among the lowest-cost producers, so it can still generate a tremendous amount of cash. Given that Brent crude oil is currently at $81 per barrel at the time of this writing, Chevron is set up nicely to return a lot of capital to shareholders.

CVX stock has seen extremely strong gains of 75% from levels of $85 in early January 2021 to around $150 now, vs. an increase of about 30% for the S&P 500 over this roughly 3-year period. However, the increase in CVX stock has been far from consistent. Returns for the stock were 39% in 2021, 53% in 2022, and -17% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that CVX underperformed the S&P in 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for other heavyweights in the Energy sector including XOM, COP, and PBR, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could CVX face a similar situation as it did in 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?

Our forecast indicates that Chevron’s valuation is around $162 per share, which is 10% higher than the current market price. Look at our interactive dashboard analysis on Chevron Earnings Preview: What To Expect in Q4? for more details.

(1) Revenues expected to be above the consensus estimates

Trefis estimates Chevron’s Q4 2023 revenues to be around $49.7 Bil, marginally above the consensus estimate. The company’s third-quarter revenues fell around 19% y-o-y to $54.1 billion, primarily due to lower upstream realizations and margins on refined product sales. Chevron’s Q3 net oil production jumped 20% y-o-y to 231k barrels of oil equivalent (boe)/day, due to the PDC Energy acquisition, which added 179K boe/day in the quarter, and net production increases in the Permian Basin. That said, the company looks well-positioned to benefit from its growing activity in the Permian Basin. By 2026, the company expects to generate more than $4 billion in free cash flow from oil production in the Permian.

Chevron is lowering its carbon footprint by investing in hydrogen, and alternative fuels like diesel and natural gas produced from renewable feedstocks instead of fossil fuels. Chevron is buying PDC Energy, an onshore U.S. energy producer for $6.3 billion. The core reason for the purchase is to increase the company’s oil reserves and reduce the carbon intensity of the company’s energy production.

(2) EPS likely to beat consensus estimates marginally

Chevron’s Q4 2023 earnings per share (EPS) is expected to be $3.15 as per Trefis analysis, slightly ahead of the consensus estimate. In Q3, the company’s net income fell to $6.5 billion, or $3.48 per share, from $11.2 billion, or $5.78 per share, in the year-earlier quarter. CVX’s upstream earnings fell 38%  y-o-y to $5.76 billion, with U.S. Upstream down 39% to $2.07 billion and International Upstream down 38% to $3.68 billion. In addition, its downstream earnings fell 33%  y-o-y to $1.68 billion, with U.S. Downstream up 7% to $1.37B and International Downstream down 75% to $307 million.

(3) Stock price estimate higher than the current market price

Going by our Chevron’s Valuation, with an EPS estimate of around $13.24 and a P/E multiple of around 12.2x in fiscal 2023, this translates into a price of about $162, almost 10% higher than the current market price. It should be noted that we use core sales revenue (which comes from the sale of hydrocarbons) figures that exclude the revenue it generates from the distribution, processing, and marketing of hydrocarbon and other sources of income.

It is helpful to see how its peers stack up. Chevron Peers shows how CVX stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 2/1/2024
[2] Cumulative total returns since the end of 2016