It has been about a month since the last earnings report for Chevron (CVX). Shares have added about 0.9% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Chevron due for a pullback? 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 drivers.
Chevron Q3 Earnings Top on Production Gains
Chevron reported adjusted third-quarter earnings per share of $1.59, above the Zacks Consensus Estimate of $1.47. The beat was driven by strong production, which increased almost 3% from the third quarter of 2018.
However, the bottom line was below the year-earlier quarter's earnings of $2.11 per share due to lower oil and natural gas price realizations, together with weak refined products sales margins in the U.S.
Quarterly revenue of $36.1 billion missed the Zacks Consensus Estimate of $39.1 billion and was down 17.9% year over year.
Upstream: Chevron’s total production of crude oil and natural gas increased 2.6% compared with last year’s corresponding period to 3,033 thousand oil-equivalent barrels per day/MBOE/d (60% liquids) – the fourth successive quarter where volumes exceeded 3 million barrels per day. The U.S. output rose 12.4% year over year to 934 MBOE/d but the company’s international operations (accounting for 69% of the total) fell 1.2% to 2,099 MBOE/d.
Apart from the shale assets in the prolific Permian Basin, the strong output could be attributed to contribution from its Wheatstone LNG development in Australia, partially offset by normal field declines and the impact of asset dispositions.
However, the rise in production was more than offset by lower oil and gas realizations, the result being a 20% fall in Chevron’s upstream segment profit – from $3.4 billion in the year-earlier quarter to $2.7 billion.
Downstream: Chevron’s downstream segment achieved earnings of $828 million, 39.7% lower than the profit of $1.4 billion last year. The decline primarily underlined a fall in domestic refined products sales margins, absence of gains from asset sales and higher operating expenses in the United States.
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 $7.9 billion in cash flow from operations, down from $9.6 billion a year ago. The decrease in cash flow could be attributed to falling price realizations in the upstream business.
In the third quarter, Chevron paid $2.2 billion in dividends and repurchased $1.8 billion worth of shares.
The company spent nearly $5 billion in capital expenditures during the quarter, edging down from the year-ago period’s $5.1 billion. Roughly 86% of the total outlays pertained to upstream projects.
As of Sep 30, the San Ramon, CA-based company had $11.7 billion in cash and cash equivalents and total debt of $32.9 billion, with a debt-to-total capitalization ratio of about 17.4%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Chevron has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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