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Factors Setting the Tone for Chevron's (CVX) Q2 Earnings

Zacks Equity Research

Chevron Corporation CVX is scheduled to release second-quarter 2019 results before the opening bell on Aug 2. The current Zacks Consensus Estimate for the to-be-reported quarter’s earnings per share is $1.74 on revenues of $42.5 billion.

In the last reported quarter, the integrated oil and gas company beat the consensus mark for earnings by 10.32% on the back of output gains. However, the bottom line fell from the year-ago quarter amid lower y/y oil prices. As far as earnings surprises are concerned, the San Ramon, CA-based U.S. oil major surpassed the Zacks Consensus Estimate thrice in the last four quarters, with average positive surprise of 2.33%.

Chevron Corporation Price and EPS Surprise

Chevron Corporation Price and EPS Surprise

Chevron Corporation price-eps-surprise | Chevron Corporation Quote

Investors are keeping their fingers crossed and anticipating that Chevron will surpass earnings estimates this time around. Let’s see which way the company’s top and bottom-line estimates are trending.

The Zacks Consensus Estimate for revenues is pegged at $42.5 billion. It generated revenues of $42.2 billion in the prior-year quarter. The Zacks Consensus Estimate for second-quarter earnings per share of $1.80 indicates a marginal improvement from $1.78 recorded in the corresponding quarter of the prior year. The earnings estimates for the to-be-reported quarter have been revised downward by six cents in the past seven days.

Let’s delve deeper into the factors that are likely to influence Chevron’s second-quarter earnings.

Factors at Play

The company’s upcoming results are set to benefit from increasing output. The Zacks Consensus Estimate for second-quarter production volumes is pegged at 3,095 thousand oil-equivalent barrels per day (MBOE/d), suggesting an improvement from 2,826 MBOE/d in the year-ago period. Chevron is likely to record higher year-over-year output from top-tier assets in Permian and Gulf of Mexico, as well as the Wheatstone LNG plant in Australia. While higher output may buoy the company’s upstream results, we remain concerned of oil and gas prices that declined y/y amid rising fuel inventories, slowdown of global economy and trade tensions. Consequently, the Zacks Consensus Estimate for the upstream segment’s operating income is pegged at $2,863 million, implying a decline from the year-ago reported figure of $3,295 million.

The Zacks Consensus Estimate for the to-be-reported quarter’s refinery input is pegged at 1,590 thousand barrels per day (mbpd), pointing to a decline from the year-ago level of 1,595 mbpd. Nonetheless, year-over-year widening of crack spreads in the to-be-reported quarter is likely to fuel the downstream segment’s margins. Consequently, the Zacks Consensus Estimate for segmental income stands at $890 million, higher than $838 million recorded in the year-ago quarter.

Earnings Whispers

Our proven model does not show that Chevron will beat estimates in the to-be-reported quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat the consensus estimate. That is not the case here as you will see below. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%.

Zacks Rank: It currently has a Zacks Rank of 3, which increases the predictive power of ESP. But we also need to have a positive Earnings ESP to be confident of a positive surprise.

Note that we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing a negative estimate revision.

Stocks to Consider

While earnings beat looks uncertain for Chevron, here are some firms from the energy space that you may want to consider on the basis of our model, which shows that these have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

Marathon Oil Corporation MRO has an Earnings ESP of +0.48% and is a #3 Ranked player. The company is slated to release second-quarter 2019 earnings on Aug 7. You can see the complete list of today’s Zacks #1 Rank stocks here.

NuStar Energy L.P. NS is set to report second-quarter 2019 earnings on Aug 8. The stock has an Earnings ESP of +14.58% and a Zacks Rank #3.

Cheniere Energy, Inc. LNG is set to report second-quarter 2019 earnings on Aug 8. The stock has an Earnings ESP of +88.46% and a Zacks Rank #2.

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