CVX with Nobias technology: After Rallying 12% During the Last Month, Does Chevron Have More Room To Run?
Thus far, 2021 has been a banner year for the energy space. The entire market has performed well, with the S&P 500 up 16.9% on a year-to-date basis. However, the energy sector is outpacing the broader maket’s results by a wide margin as the best performing S&P 500 sector thus far, up 50.09% year-to-date.
The oil majors have largely underperformed their sector benchmark; however, 50% gains in a very high bar to clear. Chevron (CVX), for instance, is up 27.95% thus far throughout 2021. This beats the S&P 500 by roughly 65%, so CVX investors should be quite happy. However, CVX shares have been on such a strong run during the last month (where they’re up more than 12%) that we wanted to take a look at what the Nobias credible authors have had to say about the company’s shares to see if this rally is expected to continue and whether or not CVX can potentially make up some of the lost ground, relative to its sector peers.
In a recently published article titled, “5 Dow Stocks With the Biggest Dividends Are Great Q4 Buys Now”, Lee Jackson, a Nobias 5-star rated analyst, provided his bullish outlook for CVX shares. Jackson wrote, “This energy giant is a solid way for investors who are more conservative to be positioned in the sector. Chevron Corp. (NYSE: CVX) is a U.S.-based integrated oil and gas company, with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals.” He continued, highlighting what sets CVX apart from its peers, saying, “With the strongest financial base of the majors, coupled with an attractive relative asset base, many on Wall Street feel that Chevron offers the most straightforwardly positive risk/reward.”
CVX with Nobias technology Oct 2021
Today, CVX shares yield 4.96%, which is well above the S&P 500’s 1.3% dividend yield. And, Jackson believes that this yield is relatively safe, saying, “Although current conditions do not warrant a large focus on production growth, Chevron possesses numerous medium-term drivers that should support production levels in the coming years.”
Although CVX’s recent performance appears to have been based upon positive sentiment surrounding the oil industry, with especial regard to record high natural gas prices, investors can go back to CVX’s strong Q2 earnings beat when the company posted its quarterly results back in late July as the base of the recent rally.
Shariq Khan, a Nobias 4-star rated analyst, covered these results for Yahoo Finance. In his piece, Khan notes that CVX’s disciplined capital spending is the primary reason that the stock is performing so well, fundamentally speaking. Khan wrote, “Chevron last year slashed spending to allow profits to flow at above $50 a barrel. Lower costs and higher prices generated the highest cash flow in two years, enabling the company to pare debt and resume share repurchases, officials said.”
Khan said that Chevron’s Chief Executive Michael Wirth mentioned that “Share buybacks will resume this quarter at an annual rate of between $2 billion and $3 billion.”. This is obviously a shareholder friendly move and these buybacks, alongside higher margins produced by strong energy prices should bolster CVX’s bottom-line results coming into future quarters.
With regard to the company’s second quarter results, Khan said that Chevron “reported an adjusted profit of $3.27 billion, or $1.71 per share, compared with a loss of $2.92 billion, or $1.56 per share, the same quarter a year ago. Year-ago results included writedowns. Earnings topped Wall Street estimates of a $1.50 a profit, according to Zacks consensus of eight analysts.”
Value Investing News, a Nobias 4-star rated analyst, also covered CVX’s Q2 report and they wrote, “Chevron's revenue increased 1 percent over the past trailing twelve-month period versus the previous twelve-month period. Gross margins increased to 25.51% for the second quarter compared to the same period in the previous year, and operating margins increased to 8.66% over the same period. Net earnings for past trailing twelve months were $3587.0 million, up 141% from the prior year.”
With specific regard to the aforementioned strong balance sheet that CVX boasts, Value Investing News said, “Moving on to the balance sheet, Chevron's cash levels jumped 7% for the second quarter over the same period last year. Overall liquidity of the balance sheet, as measured by the current ratio, increased 9.48% this past year. The current ratio for Chevron now stands at 1.11. The company increased shares outstanding by 3.27%.” This should help to provide solace to investors. Furthermore, the strong financial position that CVX finds itself in not only allows for the company to return cash to shareholders, but also invest in future growth initiatives.
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
Neha Chamaria, a Nobias 4-star rated analyst, recently penned a piece at The Motley Fool, highlighting one such recent investment. On September 9th, Chamaria wrote, “This morning, it announced a collaboration with Chevron U.S.A, a subsidiary of oil giant Chevron (NYSE:CVX), to jointly invest in facilities that'll produce sustainable aviation fuel from inedible corn, as well as protein and corn oil as byproducts. In exchange for its investments, Chevron will have the right to purchase 150 million gallons of fuel per year.” She continued, writing, “In a big move, the company recently established a separate business unit to fast-track decarbonization and has been on a collaboration spree in recent weeks. On Sept. 7, Chevron announced plans to produce a test batch of sustainable aviation fuel for Delta Air Lines (NYSE:DAL). Its collaboration with Gevo looks to be related to those plans.”
In short, CVX is using its strong cash flows derived largely from fossil fuels in the present to diversify its revenue stream as we head into a future that is trending towards more renewable energy sources. Overall, the vast majority of credible authors that the Nobias algorithm tracks share the bullish sentiments shared above. Right now, 92% of the credible authors that we track express a “Bullish” outlook for CVX shares.
The average price target amongst the credible Wall Street analysts that we track for CVX is currently $121.50. Today, CVX trades for $108.05. This average price target points towards upside potential of approximately 12.5%.
Disclosure: Nicholas Ward has no positions in any stock mentioned in this article. Nicholas Ward wrote this article for Nobias at their request with a view of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
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Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.