Chevron Stocks To Trade Higher After Q2?


Chevron Corporation (NYSE: CVX), a company that manufactures and sells a range of refined petroleum products, including gasoline, diesel, marine and aviation fuels, premium base oils, finished lubricants and fuel oil additives, is slated to announce its fiscal second. quarterly results on Friday 29 July. We are expecting Chevron
stocks are likely to trade higher due to better-than-expected Q2 results, with sales and earnings both marginally exceeding market expectations. Higher oil prices have been a major catalyst for Chevron this year. While the oil price per barrel peaked in March, it remains high, currently staying around $95 a barrel, and is likely to remain high for quite some time – fueled by rising demand as pandemic restrictions and fears ease amid the Russian invasion of Ukraine. As oil prices rise, Chevron finds itself with cash. The company’s operating cash flow nearly doubled year-over-year (yoy) to $8.1 billion in the first quarter of 2022, while free cash flow increased 144% yoy to $6.1 billion (highest FCF in its year). history). In addition, Chevron reported that its US oil and gas production was up 10% in the first quarter compared to the same period last year. Accordingly, it raised its full-year guidance to a range of 700,000 to 750,000 barrels per day, a 15% increase from 2021. In addition, the company also expects operating cash flow per share to grow by 10% annually through 2026. as long as Brent crude does not fall below $60 a barrel.

Chevron is an integrated oil stock, meaning they have midstream (transmission pipelines) and downstream (refineries) assets in addition to the upstream assets. This helps the company minimize the damage incurred in the event of a recession. In the case of lower energy commodity prices, the company can take advantage of downstream assets by reducing input costs and increasing demand. In contrast, midstream assets typically have fixed-fee or volume-based business arrangements, which usually protect them from fluctuations in commodity prices.

Our forecast indicates that Chevron’s valuation is around $158 per share, which is 6% higher than the current market price. View our interactive dashboard analysis on Chevron Income example: What to expect in Q2? for more details.

(1) Earnings expected to be slightly above consensus estimates

Trefis estimates Chevron’s second quarter 2022 revenue to be approximately $58.9 billion, slightly above the consensus estimate. In the first quarter, soaring oil prices helped Chevron’s sales grow 68% year-over-year (yoy) to $52.3 billion. We also expect similar momentum in the second quarter. That said, the company also seems well positioned to capitalize on its growing business in the Permian Basin. Chevron now expects Perm production to be at least 15% higher in 2022 than in 2021. By 2026, the company expects to generate more than $4 billion in free cash flow from Perm oil production. A quick comparison would be Chevron’s total free cash flow in 2021, which was $21 billion.

Chevron is reducing its carbon footprint by investing in hydrogen and alternative fuels such as diesel and natural gas, produced from renewable raw materials instead of fossil fuels. It acquired renewable energy
Group and signed a joint venture with Bunge
to develop renewable fuel feedstocks to support future renewable fuel production.

(2) EPS likely to marginally beat consensus estimates

Chevron’s second quarter 2022 earnings per share are expected to be $5.18 according to Trefis’ analysis, slightly higher than the consensus estimate. Higher prices and sales volumes drove Chevron’s first-quarter net profit to $6.3 billion (or $3.22 per share), up from just $1.4 billion (or 72 cents per share) in the same period a year past.

(3) Estimate of the stock price higher than the current market price

along our Chevron’s rating, with an EPS estimate of about $17.75 and a P/E multiple of about 8.9x in fiscal 2022, this translates to a price close to $158, nearly 6% higher than the current market price. As long as oil prices remain strong, Chevron’s stock could continue to rise in the near term. Meanwhile, Chevron could continue to increase its cash flow over the longer term through investments in lower-carbon fuels, leading to a further rise in share prices.

It’s helpful to see how his peers are doing. Chevron Peers shows how CVX stocks compare to peers on metrics that matter. Other useful comparisons for companies in different sectors can be found at Peer Comparisons.

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