Case Study: What Credible analysts are saying on Chevron (CVX) stock
Key Points
Performance
Chevron's shares fell by 1.0% this week. On a year-to-date basis, CVX is up by 3.14%. This compares poorly to the S&P 500, which is up by approximately 6.44% during 2023 thus far.
Event & Impact
Chevron announced Q4 earnings this week, beating Wall Street’s estimates on the top-line, but missing on the bottom-line. CVX’s revenue during Q4 came in at $56.47 billion, up by 17.3% on a year-over-year basis, beating Wall Street’s consensus estimate by $2.5 billion. The company’s non-GAAP earnings-per-share totaled $4.09, missing consensus estimates by $0.20/share.
Noteworthy News:
Chevron posted record oil production and cash from operations generation during 2022. Furthermore, the company raised its dividend by 6% this week, alongside a $75 billion buyback announcement.
Nobias Insights
80% of recent articles published by credible authors focused on Chevron shares offer a “bullish” bias. 2 out of the 4 credible Wall Street analysts who cover CVX believe shares are likely to rise in value. The average price target being applied to Chevron by these credible analysts is $198.50, which implies upside potential of approximately 10.6% relative to the stock’s current share price of $179.45.
Bullish Take Kit Norton, a Nobias 4-star rated author, said, “The energy giant reported record profits and cash flow for 2022, on top of its earlier announcement launching a massive $75 billion share buyback and raising its dividend.”
Bearish Take Scott Levine, a Nobias 4-star rated author, said, “While there was a lot to celebrate, it seems investors are acutely focused on the lower-than-expected earnings.”
CVX Jan 2023
Oil major Chevron (CVX) announces fourth quarter earnings this week. The company produced record oil production and announced a $75 billion buyback authorization; however, Chevron missed earnings-per-share estimates, causing shares to dip by 1.0% during the week.
Bullish Nobias Credible Analysts Opinions:
Coming into Chevron’s Q4 results, Ahmed Farhath, a Nobias 5-star rated author, published a news story at Seeking Alpha which highlighted the sentiment surrounding CVS’s earnings report on Wall Street. He said, “Over the last 2 years, CVX has beaten EPS estimates 50% of the time and has beaten revenue estimates 63% of the time.”
Farhath continued, “Over the last 3 months, EPS estimates have seen 7 upward revisions and 9 downward. Revenue estimates have seen 0 upward revisions and 4 downward.” He noted, “The oil major in late October posted an easy third quarter beat. Cash flow from operations surged to a record $15.3B.”
And, as Kit Norton, a Nobias 4-star rated author, who covered Chevron’s Q4 earnings results as well as its recent shareholder returns announcement in an article that he published at Investors.com this week noted, those record results continued to flow in.
Norton wrote, “The energy giant reported record profits and cash flow for 2022, on top of its earlier announcement launching a massive $75 billion share buyback and raising its dividend.” He highlighted Wall Street estimates as well as Chevron’s quarterly and annual results, stating:
“Estimates: Wall Street predicted EPS growing 69% to $4.33. Analysts targeted a 9% sales increase, to $52.68 billion.”
“Earnings: Chevron reported a 60% earnings jump, to $4.09 per share. Revenue grew 17% to $56.47 billion. Full-year earnings in 2022 ballooned 128% to $18.83 per share while sales increased 51% to $246.25 billion.”
Norton put a spotlight on the company’s bottom-line, writing, “Cash flow from operations in 2022 totaled $49.6 billion, compared with $29.2 billion in 2021.” “Meanwhile,” he said, “capital spending in 2022 was $12.3 billion, up from $8.6 billion in 2021.” In its Q4 report, Chevron highlighted record “annual cash flow from operations” as well as record “annual U.S. oil and gas production”. These record results gave management the confidence to return a significant account of cash to shareholders.
Norton said, “On Wednesday, Chevron announced its $75 billion stock buyback program, which represents 20% of shares outstanding at current price levels.” “Chevron's previous stock buyback program of $25 billion began on Jan. 2019 and will end on March 31, 2023,” he noted.
Furthermore, Norton said, “Chevron also boosted its quarterly dividend by 6%, to $1.51 a share.” While shareholders cheered these headlines, the White House wasn’t so happy. Norton quoted White House Assistant Press Secretary Abdullah Hasan, who tweeted, "For a company that claimed not too long ago that it was 'working hard' to increase oil production, handing out $75 billion to executives and wealthy shareholders sure is an odd way to show it.”
Bearish Nobias Credible Analysts Opinions:
Bhavik Nair, a Nobias 4-star rated author, also covered the White House’s disdain for Chevron’s buyback announcement. In an article published at Benzinga, Nair wrote, “U.S. Council of Economic Advisers member Jared Bernstein highlighted the fact that President Joe Biden considers excessive buybacks by corporations as problematic.”
Nair went on to quote Bernstein, who gave an interview to Bloomberg TV this week. In the interview Bernstein said, “If you listen to the President's comments on buybacks, this is something he views as problematic when it's excessive. That's one of the reasons why the Inflation Reduction Act had a 1% tax introduction on buybacks. That's in legislation. That's not specifically for one sector over another.”
Chevron shares rallied roughly 3.5% on Thursday in response to the buyback news; however, after CVX’s earnings miss on Friday, shares dropped 4.44% during Friday’s trading session. Regarding this sell-off, Scott Levine, a Nobias 4-star rated author, published an article at the Motley Fool titled, “Why Shares of Chevron Are Falling Today”.
Levine mentioned CVX’s record results, but said, “While there was a lot to celebrate, it seems investors are acutely focused on the lower-than-expected earnings.” Levine, on the other hand, was willing to focus on the company’s record cash flows. He put a spotlight on the most bullish aspects of CVX’s report, stating, “For one, Chevron reported $12.5 billion in cash from operations for the quarter, contributing to Chevron's achieving a company record for annual operational cash flow of $49.6 billion.” He also wrote, “With regards to free cash flow, Chevron reported $8.7 billion for Q4 2022, resulting in 2022 free cash flow of $37.6 billion -- a year-over-year increase of 78.2%.”
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.
After the stock’s sell-off on Friday, Levine said, “Chevron's stock is currently on sale, trading at 10.8 times forward earnings.” He concluded, “While the bottom-line miss is driving some to exit their positions today, investors looking to power their portfolios with a leading energy stock would be wise to consider shares of Chevron.”
Overall bias of Nobias Credible Analysts and Bloggers:
The vast majority of credible authors who have covered Chevron recently agree with Levine’s conclusion. 80% of recent articles published by Nobias 4 and 5-star rated authors expressed a “bullish” bias.
Furthermore, the average price target being applied to CVX shares by the credible Wall Street analysts that the Nobias algorithm tracks is currently $198.50. Compared to Chevron’s closing price of $179.45 on Friday, that average price target represents upside potential of approximately 10.6%.
Disclosure: Nicholas Ward has no CVX position. Nicholas Ward wrote this article for Nobias at their request with the intention 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.