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Chevron (CVX) Down 16.2% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Chevron (CVX). Shares have lost about 16.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Chevron due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Chevron Q4 Earnings Top on Production Gains

Chevron reported adjusted fourth-quarter earnings per share of $1.49, above the Zacks Consensus Estimate of $1.47. The beat was driven by strong production from the Permian Basin.

However, the bottom line was below the year-earlier quarter's earnings of $2.06 per share due to lower oil and natural gas price realizations.

The company, which recently raised its quarterly dividend from $1.19 to $1.29, generated revenue of $36.4 billion. The sales figure missed the Zacks Consensus Estimate of $39.8 billion and was down 14.2% year over year.

Chevron announced that it added 494 million barrels of oil-equivalent in proved reserves in 2019, primarily from LNG projects in Australia and deepwater assets in the Gulf of Mexico.

Segment Performance

Upstream: Chevron’s production of crude oil and natural gas remained essentially unchanged from the year-earlier level at 3,078 thousand oil-equivalent barrels per day/MBOE/d (61.5% liquids) – the fifth successive quarter where volumes exceeded 3 million barrels per day.

Contribution from the shale assets in the prolific Permian Basin were offset by normal field declines, turnarounds and the impact of asset dispositions. The fourth-quarter average production from the showpiece Permian Basin was 514 MBOE/d, up 36% year over year.  

The U.S. output rose 16.3% year over year to 998 MBOE/d but the company’s international operations (accounting for 68% of the total) fell 6.5% to 2,080 MBOE/d. For the full-year 2019, Chevron’s worldwide production averaged a record 3,058 MBOE/d, reflecting an increase of 4.4% from 2,930 MBOE/d a year ago.

Despite flat production volumes, Chevron’s upstream segment incurred a massive loss of $6.7 billion, compared with the year-ago profit of $3.3 billion. Apart from asset impairment charges, the nosedive to a loss could be blamed on significantly lower oil and gas realizations.

Downstream: Chevron’s downstream segment achieved earnings of $672 million, 21.8% lower than the profit of $859 million last year. The decline primarily underlined a fall in international refined products sales margins and planned turnaround activities.

Cash Flows, Capital Expenditure

America's No. 2 energy producer behind ExxonMobil delivered a soft cash flow performance this quarter – an important gauge for the oil and gas industry – with $5.6 billion in cash flow from operations, down from $9.1 billion a year ago. The decrease in cash flow could be attributed to falling lower price realizations in the upstream business.

The company's cash flow for the full-year 2019 was $27.3 billion, down 10.8% from 2018.

In the fourth quarter, Chevron paid $2.3 billion in dividends and repurchased $1.1 billion worth of shares. For the full-year 2019, the company shelled out $9 billion in dividends, and bought back $4 billion of its shares.

The company spent just over $6 billion in capital expenditures during the quarter, edging up from the year-ago period’s $5.8 billion. More than 83% of the total outlays pertained to upstream projects. In 2019, capital spending amounted to $21 billion.

Balance Sheet

As of Dec 31, the San Ramon, CA-based company had $5.7 billion in cash and cash equivalents and total debt of $27 billion, with a debt-to-total capitalization ratio of about 15.8%.




 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -9.65% due to these changes.

VGM Scores

At this time, Chevron has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Chevron has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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