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Is a Beat Likely for Chevron (CVX) This Earnings Season?

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·5 min read
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Chevron Corporation CVX is scheduled to release first-quarter 2021 results on Friday Apr 30, before the opening bell.

The Zacks Consensus Estimate for the to-be-reported quarter is pegged at earnings of 91 cents per share while the same for revenues stands at $30.9 billion.

Against this backdrop, let’s consider the factors that are likely to impact the company’s March-quarter results.

Factors at Play

Chevron's cost-reduction efforts are consistently encouraging. For the 2021-2025 period, the company reiterated its organic capital and exploratory expenditure guidance in the $14-$16 billion range. Further, it doubled its initial estimate of Noble Energy synergies to $600 million, whichis anticipated to lower operating cost by 10% from the 2019 levels.

Chevron’s capital-efficient investment plan and cost-effective measure is expected to double its return-on-capital employed. This, in turn, may lead to free cash flow growth of more than 10% and a capital budget as low as $14 billion per year through 2025. All these strategic moves are expected to have driven the first-quarter earnings and cash flows higher.

With the increase in oil prices that faced persistent pressure after the coronavirus hit global energy demand hard, the outlook for Chevron seems positive.

Per the U.S. Energy Information Administration, the first quarter of 2021 began with WTI prices trending at $47.62 per barrel. The same exited the period at $59.16. This price rise is expected to have bettered Chevron’s upstream earnings in the quarter under review. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings from the upstream segment is pegged at $2.2billion, indicating growth from the sequential quarter’s reported figure of $501 million.

Further, the first-quarter performance of the company’s downstream business, which manufactures and distributes additives, lubricants and petrochemicals, is expected to have improved sequentially.Notably, the Zacks Consensus Estimate for the March-quarter earnings from this segment is pegged at $77 million. However, the sequential quarter reported a loss of $338 million.

What Does Our Model Say?

Our proven Zacks model predicts 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 chances of beating estimates.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Chevron has an Earnings ESP of +6.08%.

Zacks Rank: Chevron currently sports a Zacks Rank of 1, which increases the predictive power of ESP.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Highlights of Q4 Earnings & Surprise History

Chevron reported adjusted fourth-quarter loss per share of one cent. The Zacks Consensus Estimate was of a profit of 8 cents. The company also earned $1.49 per share in the year-ago period. This underperformance reflects a sharp decline in oil and natural gas price realizations plus squeezed refined products margins.

This was partly offset by higher production on account of the Noble Energy acquisition and this integrated energy major’s successful cost-control actions, which allowed it to lower operating expenses and capital spending by 10% and 47%, respectively, from the year-ago levels in the face of falling commodity prices.

The company generated revenues of $25.2 billion, missing the Zacks Consensus Estimate of $27.3 billion. The top line also plunged 30.5% year over year.

As far as earnings surprises are concerned, this San Ramon, CA-based company’s bottom line surpassed the Zacks Consensus Estimate in two of the trailing four quarters and lagged the same in the remaining two quarters, the average beat being 14.01%. This is depicted in the graph below:

Chevron Corporation Price and EPS Surprise

Chevron Corporation Price and EPS Surprise
Chevron Corporation Price and EPS Surprise

Chevron Corporation price-eps-surprise | Chevron Corporation Quote

Other Stocks to Consider

Some other firms worth considering from the energy space on the basis of our model that shows that these too have the right combination of elements to beat on earnings this season are as follows:

Cabot Oil & Gas Corporation COG has an Earnings ESP of +2.31% and a Zacks Rank #3, currently. The firm is scheduled to release earnings on Apr 29.

Marathon Petroleum Corporation MPC has an Earnings ESP of +2.45% and a Zacks Rank of 3, currently. The firm is scheduled to release earnings on May 4.

NuStar Energy L.P. NS has an Earnings ESP of +78.08% and is Zacks #3 Ranked, presently. The firm is scheduled to release earnings on May 4.

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NuStar Energy L.P. (NS) : Free Stock Analysis Report

Chevron Corporation (CVX) : Free Stock Analysis Report

Cabot Oil & Gas Corporation (COG) : Free Stock Analysis Report

Marathon Petroleum Corporation (MPC) : Free Stock Analysis Report

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