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Why Is Chevron (CVX) Up 12.3% Since Last Earnings Report?

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Zacks Equity Research
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It has been about a month since the last earnings report for Chevron (CVX). Shares have added about 12.3% in that time frame, outperforming 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 catalysts.

Chevron Incurs Loss in Q4, Boosts Production

Chevron reported adjusted fourth-quarter loss per share of one cent. The Zacks Consensus Estimate was of a profit of 8 cents. Meanwhile, the company earned $1.49 per share in the year-ago period. The underperformance reflects sharply lower oil and natural gas price realizations, plus decline in refined products margins.

This was partly offset by higher production on account of the Noble Energy acquisition and the integrated energy major’s successful cost reduction initiatives, which allowed it to lower operating expenses and capital spending by 10% and 47%, respectively, from year-ago levels in the face of falling commodity prices.  

The company generated revenue of $25.2 billion. The sales figure missed the Zacks Consensus Estimate of $27.3 billion and was down 30.5% year over year.

Segment Performance

Upstream: Chevron’s production of crude oil and natural gas increased 6.5% from the year-earlier level to 3,277 thousand oil-equivalent barrels per day/MBOE/d (60% liquids) — the first time in three quarters where volumes topped 3 million barrels per day.

The improvement reflects contribution from the Noble Energy acquisition, which was partly offset by output curtailment in reaction to the coronavirus-induced commodity price collapse. The U.S. output rose 19.7% year over year to 1,195 MBOE/d while the company’s international operations (accounting for 64% of the total) was essentially flat at 2,082 MBOE/d.

Buoyed by the uptick in volumes, Chevron’s upstream segment recorded a profit of $501 million in the fourth quarter of 2020, compared to the $6.7 billion loss in the year-ago period that included substantial asset impairment charges.

At $33 per barrel, Chevron’s average realized liquids prices in the U.S. were 30% below the year-earlier levels while prices overseas were down 30% too.

Downstream: Chevron’s downstream segment incurred a loss of $338 million, compared to last year’s profit of $672 million. The deterioration primarily underlined a fall in refined products sales margins.

Cash Flows, Capital Expenditure

The company recorded $2.3 billion in cash flow from operations, down from $5.6 billion a year ago. The plunge in cash flow could be attributed to lower price realizations in the upstream business.

The company's cash flow for the full-year 2020 was $10.6 billion, down 61% from 2019.

In the fourth quarter, Chevron paid $2.5 billion in dividends. For the full-year 2019, the company shelled out $9.7 billion.

The company spent $3.2 billion in capital and exploratory expenditures during the quarter, down significantly from the year-ago period’s $6 billion. More than 78% of the total outlays pertained to upstream projects. In 2020, capital spending amounted to $13.5 billion, down 35.7% year over year.

Balance Sheet

As of Dec 31, the San Ramon, CA-based company had $5.6 billion in cash and cash equivalents and total debt of $44.3 billion — consisting $9.4 billion from Noble Energy — with a debt-to-total capitalization of about 25.2%.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month. The consensus estimate has shifted 23.34% due to these changes.

VGM Scores

At this time, Chevron has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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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