Chevron (CVX) Upgraded to Strong Buy as Estimates Go Up
On Jul 13, Zacks Investment Research upgraded Chevron Corporation CVX – one of the largest integrated energy firms in the world – to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Over the last 30 days, the Zacks Consensus Estimate for Chevron’s second-quarter results saw a massive improvement of 60% from 20 cents to 32 cents as four out of six estimates were revised up. Moreover, for full-year 2016, the company’s Zacks Consensus Estimate increased to $1.39 per share from $1.20.
These improvements might be a reflection of escalating oil prices as compared to the mid-February lows. During mid-February, West Texas Intermediate (WTI) crude fell to a 12-year low mark of $26.05 per barrel. From there, the commodity has improved almost 72% and closed at $44.75 per barrel yesterday. Since Chevron is one of the most oil-weighted majors, it is poised to achieve significant share price appreciation.
Moreover, the global oil demand picture is anticipated to get healthier as the Paris-based International Energy Agency (IEA) projects 2016 global crude demand to grow by 1.4 million barrels per day (bpd), higher than the prior forecast of 1.3 million bpd. This projection will likely take oil price further north and benefit Chevron’s upstream business.
It is also to be considered that Chevron’s current oil and gas development project pipeline is among the best in the industry, boasting large, multi-year projects. Additionally, the company’s financial flexibility and strong balance sheet are real assets in this highly uncertain period for the economy. Chevron remains in excellent financial health, with $8.6 billion in cash on hand and an investment-grade credit rating along with a debt-to-capitalization ratio of 22%.
CHEVRON CORP Price and Consensus
CHEVRON CORP Price and Consensus | CHEVRON CORP Quote
Other Stocks to Consider
Other players in the energy sector that warrant a look include McDermott International Inc MDR, Matador Resources Company MTDR and Murphy USA Inc. MUSA. Each of these stocks also sports a Zacks Rank #1.
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