On Tuesday, May 28, 2013, U.S. energy behemoth Chevron Corporation (CVX) saw its shares rise to a new 52-week high of $127.40 – above its previous level of $126.98 – attributable to several positive developments. The closing price of the shares of the company as of the said date was $126.43, representing an impressive year-to-date return of 14.53%. Additionally, Chevron – with a market cap of $245.14 billion – boasts a long-term expected earnings growth rate of 6.30%.
In the previous month, Chevron delivered a positive first-quarter earnings surprise of 3.25%. During this period, Chevron reported earnings per share of $3.18, which surpassed the Zacks Consensus Estimate of $3.08. The company’s lower exploration expenses and volume gains aided the result.
Even though the bulk of Chevron’s sales/earnings are dependent on non-renewable energy sources like crude oil and natural gas, the company also focuses on developing alternative energy solutions. In this regard, Chevron has made strategic investments in geothermal, solar technologies and other sources of energy.
Moreover, Chevron is involved in the development of solutions, which takes waste streams of organic material and converts them into renewable energy that provides on-site power for waste-water treatment plants.
Amid economic volatility, Chevron’s financial flexibility and strong balance sheet remain its real assets. With more than $17 billion in cash and a debt-to-total capitalization ratio of roughly 9.2%, the company is in a healthy financial position.
Moreover, the existing oil and gas development pipeline project of Chevron is one of the best in the industry. By 2017, the company expects volume growth of roughly 25%.
Additionally, Chevron’s dividend policy remains attractive. The company continues to pay a growing dividend to its shareholders, which is supported by the recent 11.1% hike of quarterly payout.
However, Chevron’s production growth profile depends on the timely development of upstream projects, almost all of which have inherent risk factors. Time and cost overruns on these programs may lead to lower returns, going forward.
This accounts for Chevron’s current Zacks Rank #3 (Hold).
Meanwhile, in the energy sector three firms that are expected to significantly outperform the broader U.S. equity market over the next one to three months are Enerplus Corporation (ERF), CNOOC Ltd. (CEO) and Newpark Resources Inc. (NR). All three firms currently retain a Zacks Rank #1 (Strong Buy).
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