Up 9% Year To Date, Will Chevron’s Gains Continue Following Q1 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 first-quarter results on Friday, April 26. We expect the company’s stock to likely see little to no movement with its revenues and earnings matching expectations in its first 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. While supply cuts from Saudi Arabia and Russia, and persistent demand in Europe, have helped to build a more supportive environment for oil prices currently, any signs of a potential economic slowdown in the U.S. could lead to questions about demand in the short run. 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 ~$88 per barrel at the time of this writing, Chevron is set up nicely to return a lot of capital to shareholders in the long term.

CVX stock has seen extremely strong gains of 95% from levels of $85 in early January 2021 to around $165 now, vs. an increase of about 35% 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 BP, 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 $167 per share, which is in line with the current market price. Look at our interactive dashboard analysis on Chevron Earnings Preview: What To Expect in Q1? for more details.

(1) Revenues expected to come inline with the consensus estimates

Trefis estimates Chevron’s Q1 2024 revenues to be around $47.4 Bil, in line with the consensus estimate. The company’s fourth-quarter revenues fell around 16% y-o-y to $47.2 billion, primarily due to lower upstream realizations and margins on refined product sales. For the full year 2023, the company’s worldwide production rose 4% to more than 3.1 million barrels of oil equivalent (boe)/day, with U.S. production jumping 14%, primarily due to the acquisition of PDC Energy and growth in the Permian Basin, which was up 10% y-o-y. The company’s acquisitions and higher investments in the U.S. lifted full-year capital spending by a third to $15.8 billion, including ~$450 million into PDC Energy assets, which added 266K boe/day of oil and gas production in the Q4. Chevron plans to aggressively ramp up production from the Permian Basin, a potential early sign that U.S. oil output may exceed expectations in 2024.

(2) EPS likely to match consensus estimates 

Chevron’s Q1 2024 earnings per share (EPS) is expected to be $2.73 as per Trefis analysis, matching the consensus estimate. In Q4, the company’s net income fell to $2.3 billion, or $1.22/share, from $6.4 billion, or $3.33/share, in the year-earlier quarter. The company saw $1.8 billion of U.S. upstream impairment charges, largely to assets in California, and $1.9 billion of decommissioning obligations from previously sold assets in the U.S. Gulf of Mexico. CVX’s Q4 upstream earnings fell to $1.5 billion from $5.76 billion and downstream earnings fell to $1.15 billion from $1.68 billion in the year-ago quarter. In 2023, the company saw a nearly 40% drop in annual profit, still, it raised its quarterly dividend by 8% to $1.63/share. CVX returned a record $26.3 billion in 2023 to shareholders through dividends and buybacks.

(3) Stock price estimate in line with the current market price

Going by our Chevron’s Valuation, with an EPS estimate of around $12.18 and a P/E multiple of around 13.8x in fiscal 2024, this translates into a price of about $167, almost in line with 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 4/24/2024
[2] Cumulative total returns since the end of 2016